Key Moments

NBH’s Summer Easing Phase Nears Its Last Step

ING strategists characterize Tuesday’s upcoming meeting of the National Bank of Hungary (NBH) as the concluding move in what they call a summer “mini-rate-cut cycle.” While they frame this decision as the final step of the currently signaled sequence, they also stress that they expect the easing process to continue beyond the summer.

They link this extended path of monetary loosening to the recent improvement in inflation dynamics, noting that the July consumer price index reading of 1.2% plays a central role in shaping their expectations for additional cuts over time.

Inflation Data Seen Strengthening Case for Further Cuts

In their assessment, ING strategists emphasize that the July inflation figure represents a meaningful surprise compared with the NBH’s earlier projections.

“The final interest rate decision of the summer on Tuesday is approaching, marking the last step in the previously announced mini-rate-cut cycle. However, we are almost certain that this isn’t the end of the story, and that the mini-cycle will evolve into a midi-cycle. The July inflation data clearly sets the stage for this.”

They underline that the 1.2% outcome sits outside the uncertainty band of the central bank’s June forecast, which they say points to a significantly more favorable inflation environment than previously assumed.

“The 1.2% inflation rate in July falls outside the uncertainty range of the National Bank of Hungary’s June forecast, meaning the overall inflation picture has clearly improved.”

Focus Shifts Toward the September Inflation Report

Despite the improved inflation backdrop, ING does not expect the NBH to make decisions about the broader course of monetary easing as early as August. Instead, the strategists argue that the central bank is likely to keep the immediate focus on the latest data and current conditions at that time.

“At the same time, we doubt the August interest rate decision will concern anything other than the current situation. The central bank has made it quite clear on countless occasions that the decision on whether to continue the easing cycle will be made in light of the September Inflation Report.”

ING notes that policymakers are operating in an environment characterized by rapidly evolving geopolitical and trade developments, which complicates long-horizon commitments.

“However, this is unlikely to prompt NBH Governor Mihály Varga and his colleagues to draw hasty conclusions or make premature announcements. In today’s rapidly changing world, where geopolitical and global trade developments rewrite economic scenarios every 24 hours, the NBH is unlikely to commit to anything at this point.”

Forward Guidance and Long-Term Rate Outlook

While ING does not expect firm commitments in the near term, the strategists do see scope for the NBH to refine its communication on the policy outlook. In particular, they suggest that the central bank may tie its language more explicitly to inflation trends when signaling potential future easing.

“Forward guidance may, however, include a conditional statement regarding the inflation outlook that could signal continued interest rate cuts. According to our forecast, the Hungarian base rate could reach 4.75% by the end of 2026.”

Based on ING’s projections, the base rate path points to gradual additional cuts over time, extending the current easing process beyond the originally labeled summer mini cycle.

Projected Policy Rate Path