Hungarian Forint Report, October 2026: Cuts on Hold

EUR/HUF fixed at 366.73 on 23 October. That leaves the Hungarian forint 0.76% weaker against the euro than on 3 August (363.98), the reference date of the August report. Twelve weeks, and the pair never left a 360.18–369.18 range.

Inside that range, the MNB cut once more on 25 August and then stopped, and the ECB hiked again in September. Gas prices more than doubled from early July. The government published its 2027 budget numbers. The year-end judgement moves one band weaker as a result: C (365–378) is now the most likely outcome, at 40%.

What has the forint done since the August report?

I pulled the ECB series from 3 August and sorted each fixing into the August report's bands. Of 60 fixings, 39 fell in B (355–365) and 21 in C (365–378). None reached A or D. One day sat exactly on a line: 21 October fixed at 365.00. I counted it in C; put it in B and the split becomes 40 and 20.

The C days came in clusters: 20 August alone, 1–3 September, 14–15 September, eight fixings from 24 September to 5 October, four from 7 to 12 October, and 21–23 October. The last three are the current run.

The August report's point about not reading EUR/HUF alone held again, in the other direction. In August a firmer euro made the forint look weaker than it was. This time EUR/USD fell from 1.1535 to 1.1193, with a one-year low of 1.1177 on 7 October, and USD/HUF rose 3.83%. Against the euro the forint lost 0.76%; against the dollar, five times that.

Year to date the gap shows more clearly. Against 31 December the forint is 8.54% stronger versus the zloty, 5.13% versus the koruna, 4.78% versus the euro, 3.88% versus the Swiss franc and 0.77% versus sterling. Versus the dollar it is 0.04%, which is nothing. On 3 August the gains were 5.5% against the euro and 3.7% against the dollar, so the dollar gain is almost entirely gone.

The last week alone: 363.08 on 16 October, 364.68 on the 20th (the MNB meeting), 366.73 on the 23rd, a 1.01% rise. It was still not a volatile market. Thirty-day realised volatility (daily log returns, annualised) is 5.49%; over the past year it is 8.25%.

Why did the MNB stop cutting rates?

On 25 August the MNB cut 25 basis points, taking the base rate from 5.75% to 5.50% from the 26th. It was the fourth cut of 2026, 100 basis points in all from 6.50% in January. The statement said the path from there would be set on the basis of the September Inflation Report.

The August report called that cut half-announced, and it came. The same report also said one more cut could close the last 1% to band C without anything else happening. It did not. The fixing the day after the decision was the low of the whole period, 360.18. On 27 August the pair rose 1.05% to 363.95, back where it started, and the first C fixing (365.10 on 20 August) had come five days before the cut.

The bigger move came on 3 September. Bloomberg, citing one person familiar with the matter, reported that the MNB would pause at 5.5% and lower its inflation target from 3% to 2.5%. The story broke in the afternoon, after the 14:10 ECB fixing, so it shows up the next day: 367.43 to 363.28, a 1.13% fall in EUR/HUF and the largest one-day move since 3 August.

The August report's watch list said the wording about the period after September would matter more than the 25 basis points. That one held up. The pause story moved the fixing about twice as much as the day after the cut (-0.58%).

The 22 September meeting went the way Bloomberg had reported. The rate stayed at 5.50%; the minutes show a single option was put to the vote and all 11 members backed it. From 1 January 2028 the inflation target drops to 2.5% ±1 percentage point, from 3% ±1 today. From 2027 there will be eight rate-setting meetings a year.

On 20 October the rate was held again, with the corridor at 4.50–6.50%. I put the September and October statements side by side and re-read them. October adds a sentence that September did not have: economic-policy measures, and how markets receive them, affect the room monetary policy has. The statement does not say which measures. It was published the day after the prime minister set out the 2027 deficit target in parliament.

The reasons it gives for caution, in its own order, are high energy prices, a rising-yield environment and global uncertainty. Fiscal policy comes in the very next sentence: looking ahead, Hungary's risk assessment will be shaped primarily by the fiscal path, expectations about euro adoption and the external market environment.

While the MNB stopped, others moved up. The ECB raised its deposit rate to 2.50% on 10 September, its second hike of the year after 11 June, and the Fed went to 3.75–4.00% on 16 September. So the rate gap kept narrowing. On 3 August it was 5.75% against 2.25%, 3.50 percentage points; today it is 5.50% against 2.50%, 3.00 points (ECB deposit rate). Half of that half point came from Frankfurt.

Is Hungarian inflation really lower than the euro area's?

Yes. The HCSO's September CPI was 1.6% (August 1.3%), core 1.9% (August 2.0%). For a cross-country comparison the like-for-like measure is HICP, and there Hungary is at 2.1% against 3.8% for the euro area, up from 3.2% in August, with euro-area energy inflation at 18.9%. Neighbours: Poland 4.0%, Czechia 2.2%, Romania 6.5%, Germany 3.3%. Hungary is among the lowest in the EU.

As ex-post real rates on the same HICP basis: Hungary 5.50 - 2.1 = 3.4%, euro area 2.50 - 3.8 = -1.3%, a gap of 4.7 percentage points. Setting Hungary's domestic CPI against euro-area HICP gives 5.2 points, but that subtracts two different measures. The MNB's own positive-real-rate test uses expected inflation, so it is a different number again.

The MNB does not expect the cushion to last. Its September Inflation Report has inflation at 1.8% in 2026, 3.1% in 2027 and 2.6% in 2028.

Gas prices have doubled. What does that mean for the forint?

The front-month TTF contract (ICE Endex settlement) was €42.78/MWh on 1 July and €93.85 on 23 October, up 119%. It settled at €90.04 the day before. There was a September peak of €82.57 on the 14th and a dip to €69.81 on the 29th; since 30 September it has risen almost 30% again.

The drivers cited in press coverage, most of it sourced to Reuters:

• the Iran war, which began in late February
• force majeure at QatarEnergy, whose chief executive said about 17% of Qatar's LNG export capacity was damaged in an Iranian attack
• EU gas storage at 74.6% on 22 October, against a five-year average of about 86%
• renewed fears of escalation in October

Brent settled at $116.72 on 23 October. The forward curve puts the expensive part of the year right now: December 2026 at €93.80, calendar 2027 at €76.31. Nothing in those prices has gas falling back on its own before year-end.

For Hungary the channel runs through the balance of payments. The current account showed a €244.6m deficit in the second quarter, and the MNB put the roughly €600m deterioration in the energy balance down to the Iran war. Over four quarters the surplus is still 1.0% of GDP, and the MNB sees 2026 as a whole at 0.0%, in balance.

ING, in a note on 23 October, named the forint and the zloty as particularly exposed, citing central banks that are not hawkish and a heavy reliance on energy imports. It also expected EUR/HUF to be capped around 368–370. That is a bank view.

Hungary's one-year US sanctions waiver for Russian oil and gas expires in November and the government is seeking an extension (Reuters, 24 September). Under EU Regulation 2026/261, Russian LNG imports end by the close of 2026 and pipeline gas by autumn 2027, November 2027 at the latest.

How much does the 2027 budget cut the deficit?

Parliament passed the revised 2026 budget on 19 October, 134 votes to 48 (as reported by 444). It puts this year's deficit at 7.5% of GDP. The previous government's budget had assumed 3.7%; the current government says that by mid-year the deficit was heading for 8.3%. The first half came in at 6.2%. The 2025 deficit was 4.7%.

For 2027 the target is 4.9%. It is the first budget written from scratch by the Magyar government, which took office in May. According to 444's account of the 20 October government briefing, spending is cut by HUF 1,465bn (1.5% of GDP) and net revenue rises by HUF 665bn. The bill has not reached parliament yet: according to Portfolio, the Fiscal Council is due to discuss it on 27 October and the government on the 28th, with submission planned for the end of October. No vote date has been set.

The MNB's numbers differ. Its September Inflation Report had 6.9% for 2026 and 5.9% for 2027, less gloomy than the government on this year and gloomier on next. The report came out a month before the budget plan, so the two are not a clean comparison.

Debt stood at 75.6% of GDP at the end of the second quarter (end-2025: 74.4%). The government projects 77.2% at the end of 2027, a figure so far available only in press reports.

In the same week, the 10-year benchmark yield (ÁKK) went from 5.31% on 16 October to 5.61% on 22 October. On 22 September it had been 5.64%.

Where is Hungary's EU money?

The €16.4bn agreed for release in May comes in three parts: €10bn from the RRF, €4.2bn of cohesion funds frozen under the conditionality mechanism and €2.2bn of cohesion funds tied to academic freedom.

The €4.2bn has cleared. The Commission proposed lifting the measures on 23 September and the Council adopted the decision on 13 October. What comes back is commitments; the cash is still to follow.

For the RRF, the Council approved the amended recovery plan on 10 July at €10.0bn, of which €6.51bn in grants and €3.49bn in loans. The August report left the euro amounts out because the Council press release would not load; the Council decision itself carries these figures. By the Commission's account every member state had filed its final payment request by the end of September, and the assessment is under way. Payments have to be made by 31 December. The government says all milestones were met by 31 August. The Commission verdict the August report was waiting for has not come yet. The milestones themselves are covered in a separate piece.

When are Hungary's next credit rating reviews?

On 9 October Scope affirmed Hungary at BBB and moved the outlook to positive from stable. It cited institutional improvements and the release of EU funds, gradual fiscal consolidation, and the government's stated goal of joining the euro area in 2030.

The three larger agencies are all on negative outlooks, unchanged this year: Moody's Baa2, S&P BBB-, Fitch BBB. Reviews are due on 20 November (Moody's), 27 November (S&P) and 4 December (Fitch). Those dates come from Hungarian press reports in May; I could not confirm them on the agencies' own calendars. S&P's BBB- is the bottom rung of investment grade.

Where do the August scenarios stand?

In August the probabilities stayed put. This time they move.

The starting point is already C: 366.73, with the last three fixings all in the band. The policy-rate simple-interest forward approximation, not a market forward, puts three months out at 369.46. The rate gap alone gets the pair roughly there, so staying in C needs nothing to happen.

Gas has more than doubled and the forward curve does not see it easing by December. Energy prices were the first reason the MNB gave for caution.

The July and August reports saw carry compression through rate cuts as the mechanism on the weak side. The Hungarian cuts have stopped, yet the ECB's September hike alone took another quarter point off the gap. The MNB has also now tied its own room to economic-policy measures and their reception.

D goes from 15% to 25% partly on distance: 378 is only 3.07% away. A's 355 is a similar 3.20% away, and gets 10%. The asymmetry is deliberate. High carry pays slowly, while a carry unwind, an energy import bill and a loss of policy credibility can arrive all at once.

A stays above zero because of the budget and the EU money. ING wrote on 12 October that the 2027 budget and a medium-term consolidation plan, plus formal ERM II talks, could take EUR/HUF to 350–355 within a month and reopen MNB cuts from December. Its October forecast table has 355 for the end of the fourth quarter. Both are bank forecasts, and my judgement sits on the weaker side of them.

Turned into conditions, these are the thresholds behind the judgement:

Only the deficit is past its hostile line. Core inflation, the spread and German manufacturing are on the forint's side, and gas, still under €110, has risen almost 30% since 30 September.

What to watch, with dates

1. 27–29 October - the Fed (27–28) and the ECB (29). ING expects both to hold, with a Fed hike in December. Another ECB hike narrows the spread with no MNB move at all
2. End of October - the 2027 budget bill. Where the HUF 1,465bn of cuts come from, line by line, first becomes visible there
3. 10 and 17 November - October inflation, then the MNB rate decision. Minutes of the 20 October meeting are out on 4 November
4. 20 November to 4 December - Moody's, S&P and Fitch, in that order, all starting from negative outlooks
5. 15 and 31 December - the MNB decision alongside the December Inflation Report, then the RRF payment deadline

Somewhere in November the US sanctions waiver also expires, with no exact date reported. On prices, two lines: TTF at €110 and EUR/HUF at 378.

How to read this

The probabilities above are a judgement, not a model output, and the reasoning is written out so it can be argued with. The August report got the cut right and got wrong what the cut would do to the forint. Read this one the same way: as a list of conditions to check, item by item, as events arrive.

The HUF Strength Index on this site works on the same footing: it records what exchange rates have already done. The methodology page sets out how it is built.

Exchange rates are ECB reference rates; USD/HUF is the ECB cross rate. Policy rates and inflation come from MNB statements and the September Inflation Report, the HCSO and Eurostat; gas prices are ICE Endex settlements and yields are ÁKK benchmarks. Figures that appear only in the press are attributed in the text. Nothing here is investment advice or a recommendation to buy or sell any currency.