ANALYST VIEW - Hungary's inflation may be lower thanks to the strong forint
OTP Bank has lowered its inflation forecast for 2026 from 3.6% to 3.4%, while maintaining its forecast of 4.5% for this year. The bank's analysts say that the stronger-than-expected exchange rate of the forint and the extension of margin caps justify the change. They also believe that
inflation may temporarily fall below 3% at the beginning of next year.
At the same time, OTP analysts suggest that the received data indicates that inflationary pressures have not yet subsided, thus justifying the central bank's caution. This is particularly pertinent given the anticipated double-digit increase in the minimum wage and the government's forthcoming measures to stimulate consumption.
The MNB is committed to maintaining stability in the foreign exchange market. As margin caps significantly impact inflation, analysts do not expect the base rate to fall from 6.5% in the first half of 2026.
However, as uncertainties fade in the second half of the year, the central bank may decide to ease policy.
OTP's analyst expect two rate cuts of 25 basis points in 2026.
On Tuesday, Mihály Varga, the Governor of the central bank, reiterated the MNB's previous stern messages and emphasised that, although inflation is likely to fall within the target range at the beginning of the year, the fight against price increases is not over. This strict tone may have been the main reason for the strengthening of the forint on Wednesday, pushing the Hungarian currency to a nearly two-year high below 382.
Cover image (for illustration purposes only): Getty Images
