The Hungarian central bank launches a small summer rate-cutting cycle, with no intervention target for the forint exchange rate for now.

⑴ Hungarian Central Bank Governor Varga stated on Tuesday that the interest rate decision was not unanimously approved by all members. The central bank will initiate a small-scale rate-cutting cycle, planning to implement three cuts of 25 basis points each during the summer. ⑵ Varga also confirmed that the central bank will reassess the economic outlook in September to decide on subsequent policy directions. This suggests the pace of summer rate cuts may be fine-tuned based on inflation and growth data at that time. ⑶ Regarding exchange rate policy, the governor clearly indicated there is no intervention target for the Forint’s exchange rate; enterprises can independently manage their foreign exchange risk exposure using existing hedging tools, and the central bank will not deliberately depress the domestic currency for export competitiveness. ⑷ Varga further emphasized that domestic productivity urgently needs improvement, as this structural weakness, if unresolved, will constrain the transmission of monetary easing to potential economic growth, and the stimulating effect of rate cuts on the economy may be limited.