Hungarian Forint Outlook: Rate Cuts Ahead, but ING Sees Constructive Path for FX

Analysts at ING have issued a fresh assessment of the Hungarian Forint, acknowledging the central bank’s ongoing rate-cutting cycle while maintaining a constructive outlook for the currency. The analysis, which focuses on the interplay between monetary policy easing and external market conditions, suggests that the forint may hold up better than some peers despite lower interest rates.

Central Bank Policy and the Rate-Cut Path

The National Bank of Hungary (MNB) has been steadily reducing its key interest rate since early 2024, following a prolonged period of aggressive tightening that pushed the base rate to 13% in 2023. The central bank has cut rates by a total of 1,000 basis points so far, bringing the base rate to 6.5% as of early 2025. ING analysts note that the pace of easing has slowed in recent months, with the MNB signaling caution amid persistent inflation risks and global economic uncertainty.

ING expects further gradual cuts, with the base rate potentially reaching 6.0% by the end of the second quarter. However, the bank emphasizes that the MNB is unlikely to rush, given the need to maintain real interest rates in positive territory and support forint stability.

Constructive FX View: What ING Sees

Despite the rate-cutting trajectory, ING’s FX strategy team maintains a constructive view on the Hungarian forint. The analysts argue that the currency’s resilience is underpinned by several factors:

• Improved external balance: Hungary’s current account deficit has narrowed significantly, reducing external vulnerability.
• EU fund inflows: The expected release of frozen EU funds, potentially exceeding €10 billion, provides a strong buffer for the forint and reduces financing risks.
• Carry trade appeal: Even after rate cuts, Hungarian yields remain attractive relative to other Central and Eastern European (CEE) currencies, particularly against the euro.
• Central bank credibility: The MNB’s cautious approach to easing and its commitment to inflation targeting support market confidence.

ING forecasts the EUR/HUF exchange rate to trade in a range of 385–395 in the near term, with a bias toward the stronger end of that band. This implies limited depreciation risk despite the policy divergence between the MNB and the European Central Bank.

Market Implications for Investors and Businesses

For investors, ING’s constructive view suggests that holding long positions in the forint or Hungarian government bonds may still offer favorable risk-reward, particularly if EU fund disbursements materialize as expected. For businesses operating in Hungary, the relative stability of the forint reduces the urgency for aggressive hedging, though ING advises monitoring the pace of rate cuts and geopolitical developments closely.

The analysis also carries implications for the broader CEE region. If the forint remains stable despite rate cuts, it could signal that other central banks in the region, such as the Czech National Bank or the National Bank of Poland, may have more room to ease without triggering severe currency weakness.

Conclusion

ING’s assessment provides a nuanced picture of the Hungarian forint’s outlook: rate cuts are underway, but the currency is supported by structural improvements and external inflows. The key risk remains a faster-than-expected global economic slowdown or renewed geopolitical tensions, which could shift sentiment against emerging market currencies. For now, the constructive view reflects a careful balance between monetary easing and macro stability.

FAQs

Q1: Why is ING constructive on the Hungarian forint despite rate cuts?
ING cites improved external balances, expected EU fund inflows, attractive carry trade returns, and the central bank’s cautious approach to easing as key factors supporting the forint.

Q2: What is the current key interest rate in Hungary?
The National Bank of Hungary’s base rate stands at 6.5% as of early 2025, following a series of cuts from a peak of 13% in 2023.

Q3: What is the EUR/HUF forecast from ING?
ING forecasts the EUR/HUF exchange rate to trade in a range of 385–395 in the near term, with a bias toward the stronger end of that range.