EMEA Economic Comment: Hungary: sticking to the mini easing cycle

Research evidence excerpt

EMEA Economic Comment: Hungary: sticking to the mini easing cycle

Global Research

21 July 2026ab

EMEA Economic Comment Economics

EMEA EmergingHungary: sticking to the mini easing cycle

Gyorgy Kovacs

Economist

NBH lowers the policy rate by 25bps to 5.75% as telegraphed at the June gyorgy.kovacs@ubs.com

+44-20-7568 7563

meeting

The National Bank of Hungary (NBH) cut its policy rate by 25bps to 5.75% with a Nimrod Mevorach

Strategistunanimous decision. This is the second consecutive rate reduction, in line with the

nimrod.mevorach@ubs.com

'summer mini easing cycle' message telegraphed by NBH Governor Varga at the June +44-20-7567 0779

meeting. The decision was also in line with market consensus and our call. The overnight

deposit rate and the overnight collateralized rate were also lowered to 4.75% and

6.75% respectively. Today's rate cut was aided by the fact that: a) inflation has

undershot the NBH's trajectory from the June Inflation report; b) households' inflation

expectations continue to ease; and c) lower risk premium for Hungarian assets persisted

(in particular for the currency). The statement's official guidance has remained

unchanged from the June statement: "Looking ahead, if favourable developments

persist, the Council – while maintaining a positive real interest rate – sees room to

further decrease the base rate throughout the summer, with a decision on the

continuation to be made based on the September Inflation Report".

We maintain our call for the policy rate to be at 5.25% by end-2026

We predict inflation averaging at 2.0% y/y this year, with end of 2026 CPI climbing to

2.4% y/y. We use the following assumptions: a) fuel prices follow the current oil futures

curve; b) no removal of the food price cap (see latest on this here), but food inflation