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ING Comments on Forint After Hungary's Central Bank Governor Surprises With Rate Cut Remarks

BY MT Newswires | ECONOMIC | 12/17/25 06:54 AM EST

06:54 AM EST, 12/17/2025 (MT Newswires) -- Hungary's central bank (MNB) left rates unchanged at 6.50% on Tuesday, as expected, said ING.

The new forecast brought a dovish shift, with inflation moving from 3.8% to 3.2% on average next year and, at the same time, worsening the economic outlook, wrote the bank in a note.

However, the main surprise came from the press conference and the dovish tone of Governor Mihaly Varga, stated ING. The governor mentioned that he will evaluate new data on a meeting-by-meeting basis and, if the numbers are favorable, MNB will be ready to cut rates.

Although markets were preparing for a possible dovish tone, the central bank managed to surprise, added ING. Rate markets have priced in an additional 10bps of rate cuts next year for a total of 60bps and the terminal rate has fallen to 5.72% in 2027.

Given MNB's dovish tone on Tuesday and ING's updated forecast, the bank sees room for markets to price in more rate cuts, particularly if inflation numbers continue to surprise on the weaker side.

The forint (HUF) reversed all earlier gains on Tuesday and is weakening slightly, but ING still believes that EUR/HUF will go up in the coming days. The rate differential versus the euro (EUR) is heading toward the narrowest levels since May, indicating upside for EUR/HUF in the range of 386-388.

On the other hand, the dovish turn comes in favorable conditions for the central bank. The region is receiving support from growing hopes for a peace agreement between Ukraine and Russia, from which HUF would benefit the most within the Central and Eastern European region, in ING's opinion, and EUR/USD is testing new highs.

If the trend doesn't turn in these two stories, it will mitigate the upside risk in EUR/HUF and the central bank may feel the market support in a dovish direction looking forward, according to ING.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.

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