Hungary's central bank, Magyar Nemzeti Bank (MNB), reduced its base rate by 25 basis points to 5.75%, a move that was unanimously anticipated by analysts and in line with the bank's ongoing summer easing narrative [1]. The decision follows the restart of the MNB's easing cycle in June, with guidance indicating potential for further rate cuts during the summer, contingent on favorable inflation and financial-market conditions [1].
Despite a recent correction in the Hungarian Forint (HUF), the MNB did not cite this as a reason to pause its easing cycle. Instead, the bank's post-meeting statement highlighted that inflation developments had been more favorable than projected in the June baseline, and that the lower risk premium on domestic assets had persisted [1]. The MNB signaled that there is still room to decrease the base rate further over the summer while maintaining a positive real interest rate, with a reassessment scheduled for September based on the Inflation Report [1].
Mihaly Varga, speaking at a press conference, reinforced the central bank's message, noting that the macroeconomic outlook remains broadly consistent with the June Inflation Report. He pointed out that inflation is softer than expected, although energy prices are somewhat higher, and the ongoing Middle East conflict remains a risk factor [1]. Varga also reiterated the importance of a stable exchange rate for anchoring inflation expectations [1].
The overall communication from the MNB was described as mildly dovish, with the possibility of an August rate cut left open and a more substantial policy debate postponed until September. While the forint may have briefly weakened in response to the dovish signals, it continues to outperform regional peers such as the Polish zloty since the start of the year, with the latest reversal considered minor [1].
CONCLUSION
Hungary's central bank maintained its dovish stance, signaling further rate cuts are possible over the summer while keeping a positive real interest rate. Despite a brief weakening, the forint remains resilient compared to regional peers. The market is likely to await the September Inflation Report for clearer guidance on the future policy path.