EUR/HUF: MNB holds rates as geopolitical risks persist – ING

ING analysts Frantisek Taborsky and Zoltán Homolya expect central bank of the Hungary, Magyar Nemzeti Bank (MNB) to keep its base rate unchanged at 6.25% throughout 2026. They argue that ongoing geopolitical uncertainty, elevated energy prices and Hungary’s specific vulnerabilities leave no room for rate cuts. Even with some supportive market moves, they see the central bank maintaining a hawkish, wait‑and‑see stance.

MNB seen on prolonged policy hold

"The continuing high level of uncertainty surrounding the war in the Middle East suggests that the NBH will keep interest rates unchanged at 6.25%. While it is true that the economy is better placed to absorb the impact of higher energy prices than in 2022, the persistence of high levels of geopolitical uncertainty certainly limits monetary policy flexibility."

"As a starter, a rate cut is definitely out of the question for April, and this is a high-conviction call. We expect the central bank to adopt a hawkish tone in an attempt to influence FX market stability, keeping the EUR/HUF at lower levels. We expect the Bank to demonstrate maximum flexibility in order to convince market players and present an image of strength, calmness, patience and caution."

"Based on the updated baseline scenario for energy markets and major central banks, which is more pessimistic than before, we forecast that Hungarian inflation will continue to accelerate for the remainder of the year. We expect it to average 3.5% in the second quarter, rise above the tolerance band in the second half of the year and average 4.3% in the final quarter. Given that energy prices remain higher than before and due to their impact on Hungary, we currently see no scenario indicating an interest rate cut this year."

"However, if the worst-case scenario materialises, inflation would rise significantly, exceeding 6% during the third quarter. The NBH could not ignore this and would be forced to raise interest rates."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)