(Bloomberg) -- Hungary is poised to resume monetary easing after slowing inflation and interest-rate cuts by major global central banks widened policymakers’ room for maneuver.
The National Bank of Hungary will lower the key interest rate by a quarter-point to 6.5% on Tuesday, according to all 24 economists in a Bloomberg survey. That would match Romania’s for the highest benchmark level in the European Union. The decision will be announced at 2 p.m. in Budapest, followed by a statement and new inflation forecasts an hour later.
The central bank held interest rates steady in August after 15 consecutive monthly cuts. Deputy Governor Barnabas Virag said the pause was temporary and that there was room for one or two quarter-point reductions this year, depending on inflation developments and monetary-decisions by the Federal Reserve and the European Central Bank.
The Fed has since delivered a bigger-than-expected half-point cut last week, on the heels of a quarter-point reduction by the ECB. The headline inflation rate also fell to the lowest in three and a half years, to an annual 3.4% in August, well within Hungarian rate-setters 1 percentage-point tolerance band around their 3% target.
“The Fed’s move has both boosted risk appetite in global markets and increased the NBH’s room for maneuver, as it can restart its easing cycle without narrowing spreads vis-a-vis developed rates,” Mariann Trippon, a Budapest-based economist at Intesa Sanpaolo SpA’s CIB Bank, said in a note to clients using the central bank’s acronym.
The forint’s level may prompt policymakers to stay vigilant. The currency fell 0.4% against the euro on Monday, the second-worst performance among 23 emerging-market currencies tracked by Bloomberg. It was little changed though in the past month and has been trading in a tight range most of this year.
That may change in the run-up to the 2026 general election, according to Morgan Stanley, which on Monday warned of a steep currency selloff due to fiscal and monetary-policy risks. Barclays Plc and Citigroup Inc. had earlier also taken bearish views on the forint.
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