Forint Weakens as MNB Rate Cut Reshapes Outlook

Key Moments

MNB Policy Move and Forward Guidance

Societe Generale strategists assessed the outlook for the Hungarian Forint (HUF) following the latest decision by Magyar Nemzeti Bank (MNB) to lower its policy rate to 5.75% and to indicate that further easing is under consideration.

According to the strategists, “In CEEMEA, the MNB yesterday lowered the policy rate by 25bp to 5.75% as expected and signalled scope for further easing ahead. A reassessment of the policy level and macro outlook is scheduled in September.”

Inflation, Terminal Rate View, and Forint Performance

The bank’s analysts highlighted that domestic price dynamics are favorable for additional rate reductions. They noted that “With inflation comfortably below target and the forint resilient, we see scope for a decline to 5.0% terminal rate by year-end.”

At the same time, they questioned how much further the Forint’s strength can extend against the Euro. “That said, the question for HUF bulls is have we already seen the best of forint rally in 1H with EUR/HUF bottoming out 348.59 in mid-June.”

EUR/HUF Projections and Key Risk Factors

The strategists observed that much of the positive sentiment toward a Euro-friendly government has already been incorporated into Forint assets. They also judged that the impact of recent and anticipated rate cuts is broadly reflected in current pricing.

“While much of the optimism of Euro-friendly government is priced in by the forint assets the rate cuts too are fully priced and EUR/HUF could still end the year around 355 but for that risks are in the form of elevated oil and the 2027 budget by Peter Magyar’s government due in October.”

They maintained their view that EUR/HUF could conclude 2026 near 355, while emphasizing that developments in oil markets and details of Hungary’s 2027 budget represent important potential sources of risk for that scenario.