Key Moments
- Commerzbank’s Michael Pfister expects the Hungarian central bank to restart its rate-cutting cycle. Consensus points to a 25-basis-point move.
- Hungary records the lowest core HICP inflation among CE3 countries. However, it still holds the highest policy rate.
- Markets price in about three rate cuts over the next six months, including today’s move. Even so, the forint reaction should remain limited unless guidance changes.
Forint Strength and Inflation Backdrop Support Easing
Commerzbank strategist Michael Pfister sees conditions that support a restart of monetary easing. Market participants expect a 25-basis-point rate cut.
A strong Hungarian forint and softer inflation also support this view. Together, they keep real interest rates elevated. As a result, policymakers gain room to ease further.
According to the report, policymakers already discussed a rate cut at the previous meeting. Meanwhile, Bloomberg consensus aligns firmly with a 25-basis-point move as the base case. However, only one analyst expects a larger 50-basis-point cut.
Inflation, Real Rates, and Regional Context
The commentary highlights that Hungary has the lowest core HICP inflation in the CE3 group. However, it still maintains the highest key policy rate in the region.
This gap matters. It produces a high real interest rate. Therefore, analysts argue that monetary policy has room to loosen.
| Metric | Hungary vs CE3 |
|---|---|
| Core HICP inflation | Lowest in CE3 |
| Policy interest rate | Highest in CE3 |
| Real interest rate | High, supporting rate cuts |
Market Pricing and Forint Reaction
Markets now price a return to easing. Earlier expectations were more uncertain. However, sentiment has shifted clearly toward rate cuts.
Investors expect about three rate cuts over the next six months, including today’s decision. After that, markets price no further easing.
If inflation stays subdued, further cuts could still follow. Even so, policymakers do not signal additional easing at this meeting. Therefore, the Hungarian forint should react only modestly unless guidance changes.
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