The greatest risk in the international arena this quarter continues to be the armed conflict that broke out on the last day of February between Iran, the United States and Israel, which quickly spread to the oil infrastructure of the Gulf states. Following the sharp rise, the global market price of Brent crude oil exceeded USD 110. News of the April ceasefire, followed by reports of peace talks to end the war in Iran and the reopening of the Strait of Hormuz, only temporarily moderated oil prices and expectations regarding oil prices.
The inflationary pressures that re-emerged globally as a result of the conflict do not seem to be fading even after the end of the war. The loss of production, as well as the restoration of production and transport infrastructure, have a significant impact on energy prices and supply, which are subsequently reflected in the prices of goods and services. The fragility of peace and the resurgence of conflict entail significant upward risks to inflation
The central bank’s Monetary Council made no changes at its meetings in April and May 2026, whilst at its June meeting it decided to cut the base rate by 25 basis points, bringing it down to 6.00%. Accordingly, the upper end of the interest rate corridor changed to 7.00% and the lower end to 5.00%. Following the rate cut, the governor of the MNB announced at a press conference two additional rate cuts of 25 basis points each, to be implemented during the summer months.
Between March and May 2026, consumer prices increased by 1.9% on average, compared to the same period of the previous year. These positive trends in inflation have arisen as a result of the combined effect of several factors. At the start of the year, the high base, consolidated price adjustments and price margin restrictions were still the main factors explaining the figures. However, from March onwards, alongside the forint’s sustained appreciation, the fuel price cap came to play one of the most decisive roles. Together, these two factors were able to offset the immediate, direct effects of the energy shock triggered by the war in Iran, on the one hand by curbing imported inflation and, on the other, by limiting consumer prices.
Both domestic money market and foreign exchange market indicators strengthened significantly during Q2. The HUF strengthened by 7.98% against the Euro, by 7.39% against the US dollar and by 8.47% against the Swiss franc. Thus, at the end of June 2026, 1 euro was worth 355.1 forints, 1 US dollar 311.6 forints and 1 Swiss franc 384.9 forints.
In Q2 2026, yields on the secondary yield curve for government securities fell by between 108 and 214 basis points. The sharp yield declines were primarily due to favourable, significantly lower inflation figures, interest rate cuts on retail government securities and the onset of interest rate convergence following the April announcement of plans to introduce the euro.
The forint strengthened significantly in Q2
Both domestic money market and foreign exchange market indicators strengthened significantly during Q2. The HUF strengthened by 7.98% against the Euro, by 7.39% against the US dollar and by 8.47% against the Swiss franc. Thus, at the end of June 2026, 1 euro was worth 355.1 forints, 1 US dollar 311.6 forints and 1 Swiss franc 384.9 forints. Compared with the end of March 2026, by the end of June, government debt denominated in HUF and held by foreign investors had risen by HUF 1,960 billion to HUF 9,518 billion.
