Key Moments
- ING’s Frantisek Taborsky expects the National Bank of Hungary to lower its key rate by 25bp to 5.75%, extending the current easing cycle.
- Market pricing now implies slightly more than 75bp of total easing, including the upcoming decision, with a terminal rate between 4.75% and 5.00%.
- Taborsky projects the policy rate at 5.00% this year and 4.00% in 2028, seeing recent HUF underperformance as positioning-driven rather than fundamentals-based.
NBH Expected to Continue Gradual Easing
ING strategist Frantisek Taborsky anticipates that the National Bank of Hungary (NBH) will proceed with another 25bp reduction in its policy rate, bringing it to 5.75%. This would extend the easing cycle that the central bank resumed in June, despite the recent pressure seen in both foreign exchange and rates markets.
He notes that the NBH has already signaled further cuts for July and August, with a new forecast scheduled for September. At that point, the central bank is expected to reassess its policy trajectory.
Market Stress Versus NBH Perspective
According to Taborsky, the recent sell-off in Hungarian Forint (HUF) assets has been pronounced, marking the sharpest downturn since the April general elections. However, he believes the central bank is likely viewing conditions as more contained than financial markets currently suggest.
He highlights that June inflation once again came in below the NBH’s projection, and that the governor last week characterized the EUR/HUF range of 355-360 as stable. On this basis, Taborsky expects the central bank to stick to its existing communication strategy.
Rate Path Expectations and Market Pricing
Taborsky argues that the recent weakness in HUF assets primarily reflects investor positioning rather than a deterioration in Hungary’s underlying fundamentals, which he still regards as constructive. He sees scope for investors to re-establish long HUF positions when global conditions become more supportive.
He observes that the market is currently discounting slightly more than 75bp of easing, including the anticipated 25bp move, and is implying a terminal rate in the 4.75%-5.00% range. In contrast, his projections place the policy rate at 5.00% this year and 4.00% in 2028, suggesting that investors may ultimately adopt a more dovish outlook.
Taborsky also notes that HUF assets have lagged not only within Central and Eastern Europe (CEE) but also versus broader emerging markets. In his assessment, a substantial portion of previously expected rate cuts has already been priced out following the recent pressure on HUF-related instruments.
Policy and Market Outlook Summary
| Indicator / View | Detail |
|---|---|
| Next NBH policy move | Expected 25bp cut to 5.75% |
| Easing cycle status | Restarted in June, with cuts signaled for July and August |
| September meeting | New forecast and reassessment of policy path |
| Market-implied easing | Slightly more than 75bp, including the upcoming decision |
| Market-implied terminal rate | Between 4.75% and 5.00% |
| ING policy rate forecast (this year) | 5.00% |
| ING policy rate forecast (2028) | 4.00% |
| EUR/HUF level described as stable by governor | Around 355-360 |
| Key driver of recent HUF asset underperformance | Heavy long positioning, not weaker fundamentals |
Taborsky expects the current sell-off in HUF assets to ease once global market conditions show signs of improvement, creating an environment where investors may again look to build exposure to the forint.
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