Cooling Prices and a Firm Forint Give Hungary's Central Bank Room to Keep Lowering Rates

Standard Chartered's Saabir Salad says a strong forint and government measures have kept Hungarian inflation subdued, giving the NBH space to turn more dovish. He has trimmed his 2026 and 2027 inflation forecasts but warns that upside risks remain.

Inflation in Hungary is staying remarkably calm, and the biggest reasons are a strong Hungarian forint and a set of government measures. According to Standard Chartered's Saabir Salad, this subdued price pressure has opened the door for the National Bank of Hungary (NBH) to ease policy and adopt a noticeably more dovish stance.

Why inflation is staying tame
Despite a shock to energy prices, Hungary has managed to keep a lid on inflation. The forint's strength and government action, including caps on fuel prices, are seen as the key forces behind that resilience.

 "Inflation has remained subdued despite the energy price shock, supported by a strong HUF and government measures, including fuel price caps."
The data tells the same story. Headline CPI rose 1.8% year on year in May, coming in below Standard Chartered's own 2.2% forecast and even below the lower bound of the NBH's 3% target range.

 "Headline CPI came in at 1.8% y/y in May, below both our 2.2% forecast and the lower bound of the NBH's 3% +/-1ppt target range."

Forecasts trimmed lower
In response to those numbers, Salad has cut his inflation projections for the coming years. The 2026 forecast has been lowered to 2.2% from 3.9%, though it still sits above the central bank's own estimate, while the 2027 forecast has been reduced to 2.5% from 3.4%.

 "In light of this, we lower our 2026 inflation forecast to 2.2% (from 3.9%, still above the central bank's forecast), and our 2027 forecast to 2.5% (3.4%)."

Risks have not gone away
Even with the encouraging picture, Salad cautions that the danger is not fully behind. He believes the risks lean toward higher inflation because of Hungary's exposure to geopolitical instability, even though the central bank itself views those risks as balanced.

 "While the central bank assesses inflation risks as balanced, we continue to see risks as skewed to the upside given Hungary's vulnerability to geopolitical instability."
If inflation turns out hotter than expected, it could directly affect how quickly rate cuts proceed.

 "The pace of easing could be slower if inflation proves higher than we expect."

What this means for you
• For people in Hungary: With inflation under control and the NBH leaning dovish, borrowing and loans could get cheaper in the months ahead, making mortgages and EMIs a bit easier to manage.
• For investors: Expectations of rate cuts can drive moves in the forint and Hungarian markets, so the upside risks to inflation are worth watching closely.

Questions & Answers

1. What was Hungary's CPI in May?
Headline CPI rose 1.8% year on year in May, below Standard Chartered's 2.2% forecast and the lower bound of the NBH's target range.

2. Why has inflation stayed under control?
Despite an energy price shock, a strong Hungarian forint and government measures, including fuel price caps, have kept inflation subdued.

3. How much has Standard Chartered cut its inflation forecasts?
The 2026 forecast was lowered to 2.2% from 3.9%, and the 2027 forecast to 2.5% from 3.4%.

4. Are there any remaining risks?
Yes, Saabir Salad says risks lean to the upside because of Hungary's vulnerability to geopolitical instability.

5. What happens if those risks materialize?
If inflation proves higher than expected, the pace of rate cuts could be slower.

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