The sharper-than-forecast decline in inflation may give the National Bank of Hungary (MNB) room to begin a rate-cutting cycle in February. MBH Bank expects a 25-basis-point cut this month, followed by another easing step in March.
After the initial reductions, policymakers may pause for several months before resuming cuts in September. Under this scenario, the base rate could reach 5.5% by the end of 2026.
The outlook is supported by subdued inflation dynamics. In regional comparison, Hungary’s base rate now appears high relative to inflation. Meanwhile, the forint has performed significantly more strongly than other regional currencies in recent weeks, suggesting it can withstand lower interest rates.
Although inflation could rise in the second half of the year, increasing uncertainty, recent favorable data prompted MBH Bank to lower its year-end rate forecast by 50 basis points after reviewing expected inflation trends and the regional environment.
Since the start of the year, the forint has clearly outperformed, even as expectations for rate cuts have strengthened. Following the latest inflation release, market pricing shifted further toward easing, with investors largely factoring in near-term rate reductions and showing little concern about their impact.
Looking ahead to 2027, further rate cuts are possible, though their extent remains uncertain. If inflation accelerates again early next year, driven by rising price pressures toward the end of 2026 and a low base effect — and inflation expectations remain elevated, the MNB may refrain from quarterly rate cuts.
In that case, Hungary’s base rate could stand between 4.5% and 5% by the end of 2027, according to MBH Bank.
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