POLL — Hungary's central bank to stand pat as 2027 budget reveal looms

//realtime/verb=Open/url=cpurl://apps.cp./Apps/cb-polls?s=GCR01+46+D&st=Menu+G+C Reuters Hungary central bank rate forecasts reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=HUCPIAP Reuters Hungary average inflation forecasts reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=HUGDPAP Reuters Hungary GDP forecasts By Gergely Szakacs BUDAPEST, Oct 16 (Reuters) — Hungary's central bank is widely expected to leave its base rate steady at 5.5% next Tuesday amid a lack of clarity on the 2027 budget, seen as a pivotal factor in anchoring market optimism about the country's bid to adopt the euro.

The bank paused a string of rate cuts last month, when it lowered its inflation target to 2.5% from 3% as Hungary prepares to meet the terms of joining the single European currency. Deutsche Bank said overseas investors had poured $13.5 billion into the local bond market year-to-date as of late September, betting heavily on Prime Minister Peter Magyar's pledge to meet euro entry conditions by 2030. The 2027 budget is seen as a key credibility test for Magyar as he tackles the competing objectives of curbing the deficit below the EU's 3% limit, while honouring pledges that helped secure his landslide election win over Viktor Orban in April.

All 13 economists in a Reuters poll conducted between October 12 and 15 said the NBH would leave its base rate steady next week. The median survey forecast projects a 25-basis-point rate cut to 5.25% by the end of 2026. "The Monetary Council will likely err on the side of caution at the October 20 meeting, amid uncertainty surrounding the 2027 budget and prevailing risk sentiment," ING economists said. "However, we still expect a rate cut by year-end." Magyar's euro pledge has triggered a rally in Hungary's forint, which helped drive inflation sharply below the central bank's target.

Market expectations for cuts in the deficit have bolstered government bonds. Economists polled by Reuters see the deficit falling to 5.3% of output in 2027, compared with the government's 7.5% target for 2026. Analysts see Hungary joining the euro in 2032 or 2033. Deputy Governor Zoltan Kurali told Reuters last month that the bank could still deliver a rate cut by the end of 2026 if external market conditions are favourable and Magyar's cabinet presents a credible deficit-cutting plan to join the euro.

The head of debt agency AKK said Hungary's bond yields could fall further if the market finds Magyar's fiscal plan realistic, but warned of a backlash if the roadmap disappoints investors. "A shift in market sentiment could create a more serious risk," said Orsolya Raczova at Eurasia Group. (Reporting by Gergely Szakacs; Editing by Alex Richardson) ((gergely.szakacs@thomsonreuters.com; )