Here's what analysts think about the Hungarian central bank's latest moves

According to János Nagy, macroeconomic analyst at Erste, the decision by the MNB

came as no surprise and was in line with the broad consensus among analysts.

The more favorable inflation figures compared to September induce lower figures next year, according to current expectations: the annual average index may be close to the medium-term target even with the expected phase out of price caps.

This, in turn, may make the central bank think about interest rate cuts, which is indicated by the change in the forward guidance.

According to the analyst, the risks surrounding the inflation path have become more balanced in recently, but several factors justify maintaining caution. On the one hand, the positive impact of the strengthening of the forint has so far only been visible in volatile factors (fuel, airplane tickets) and there has been no visible leakage into basic processes (durable goods, clothing).

It is interesting that, unlike in previous months, the emphasis on exchange rate stability has been removed from the focus,

noted Nagy.

On the other hand, he said it is a warning sign that in November – after several months of stagnation – household inflation expectations rose again, as shown by both the central bank and the GKI measurements. Although the 2026 forecast has decreased significantly, it has increased to 3.3% for 2027 from the previous 3.0%.

In Nagy's view, the MNB's communication, after more than a year of keeping rates on hold,

prepares for a possible interest rate cut in the foreseeable future, which is a significant change compared to previous months.

The vulnerability of the forint experienced in recent weeks nevertheless continues to require a cautious approach, he concluded.

Zoltán Varga, senior analyst at Equilor, emphasised the importance of switching to a data-driven approach. He noted that

MNB Governor Mihály Varga had held a dovish press conference.

He repeatedly stated that they expect lower inflation than before, and that the risks surrounding inflation are now more balanced. This is why they changed their forward guidance. However, he added that inflation expectations remain high and need to be reduced.

MBH analysts Márta Balog-Béki (senior capital markets analyst) and Ádám Rodic (macroeconomic analyst) believe that the MNB's communication

continue to point towards a prudent and data-driven monetary policy, consistent with previous messages.

The Governor of the central bank emphasised the importance of achieving the inflation target in a sustainable manner,

indicating that any monetary easing would be approached with extreme caution.

Although inflationary trends were more favourable than expected in September, the MNB did not wish to take hasty steps. Financial market stability and anchoring inflation expectations remain critical factors, and the importance of the forint exchange rate in this regard was referred to.

They argue that the data-driven approach offers flexibility while also suggesting that the predictability of monetary policy hinges on macroeconomic developments. The expected temporary fall in inflation below the target at the beginning of 2026, followed by a return to the upper end of the tolerance band, shows that the MNB is taking into account the impact of repricing and the phasing out of the margin cap.

According to the new MNB inflation forecast, achieving price stability will be a protracted process. The central bank expects the target to be reached in a sustainable manner only in the second half of 2027. This suggests that the MNB will be able to maintain tight monetary conditions in the long term, even if the external interest rate environment becomes more moderate.

The most closely watched factors remain corporate repricing, the removal of margin caps and inflation expectations. While the central bank's communication conveys stability, market participants must consider that interest rate paths and monetary conditions will remain highly data-dependent. While the expansion of the central bank's guidance

may suggest that interest rate cuts could start earlier in 2026, this remains a potential risk.

[...] if data and sentiment permit, a rate cut is likely in the not-too-distant future,

commented Péter Virovácz, senior economist at ING Bank in Budapest.

"It is too early to draw final conclusions, but it seems that we may need to revert to our previous forecast of 100bp of easing in total in 2026 (25bp each quarter) instead of a backloaded 50bp cycle," he added.

The analyst noted that while the market had become increasingly dovish in recent days, it seems that the central bank still managed to surprise. "The rates market is now pricing in more rate cuts, while the FX market appeared somewhat more confused after the press conference," he said. The forint reversed all of its gains from earlier in the day and weakened slightly, although ING still believes that EUR/HUF will go up in the coming days. The rate differential vs EUR is heading towards the narrowest levels since May, indicating upside for EUR/HUF in the range of 386-388, Virovácz noted.

He believes Hungary's forint stands to gain the most within the CEE region, while EUR/USD is currently testing new highs. "If these trends persist, upside risk for EUR/HUF will be limited, and the central bank may interpret market conditions as supportive of a more dovish stance going forward," he said.

"The rates market has priced in an additional 10bp of rate cuts next year for a total of 60bp, and the terminal rate has fallen to 5.72% in 2027. Given the central bank’s dovish tone today and our updated forecast, we see room for the market to price in more rate cuts, particularly if inflation numbers continue to surprise on the weaker side."

As regards the central bank's expectation of achieving the 3% inflation target by the second half of 2027, the main difference between the MNB's forecast, and ING's own, is the expected price adjustment once the price shield measures are lifted. "We still anticipate overshooting, whereas the NBH is more relaxed about this, referring to their own survey results," said Virovácz.

He also pointed out that regarding alternative scenarios, the Monetary Council highlighted six, of which four were labelled as the most relevant. "These scenarios painted a fully balanced risk map for both economic activity and inflation, which represents a dovish shift compared to September, when the majority of the risk scenarios were pro-inflationary, emphasising the need for a continued hawkish stance," he concluded.

Nicholas Farr, Emerging Europe economist at Capital Economics, expects rates to stay on hold until after the upcoming parliamentary election next Spring. Their forecast for the base rate to end next year at 6.00% is a more hawkish view than the consensus.

Despite the dip in inflation an an expectation for CPI to fall further to below the midpoint of the central bank's target range early next year too, Farr doubts the MNB will be in a rush to restart its monetary easing cycle.

He pointed out that core inflation remains above target, at 4.1%, and inflation is temporarily being suppressed by government price controls, which seem likely to be phased out after the election. "We expect headline inflation to rise back to the top of the target range before long, and policymakers will likely be concerned about medium-term inflation risks stemming from pre-election fiscal loosening measures."

They think the MNB will likely keep interest rates on hold over the first half of next year, and they see limited room for rate cuts in 2026.

If anything, the risks to our forecast for the base rate to be cut to 6.00% by the end of next year are tilted to the upside. That compares to the latest consensus view that the base rate will be cut to 5.50-5.75%.

Cover photo: MTI Photo/Boglárka Bodnár