According to fresh analysis from ING Bank, both Hungary and Romania are positioned for significant monetary policy easing in 2025 following successful battles against inflation. The Hungarian National Bank (MNB) and the National Bank of Romania (NBR) now have substantial room to cut interest rates to stimulate economic growth while maintaining price stability.
Hungary's inflation rate has plummeted from a peak of 25.7% in 2022 to below 5%, a dramatic disinflation success in Europe. This allows the MNB, with its benchmark base rate at 7.75%, to consider aggressive easing. ING outlines three potential scenarios for 2025: a conservative 200 basis point reduction, a moderate 300 bps cut with front-loaded action, or an aggressive stimulus of 400+ bps. The central bank's decision will be influenced by global energy prices, domestic demand, and the forint's stability.
In Romania, economic growth has moderated, with GDP expansion showing clear deceleration. Inflation has declined toward the NBR's target range, currently around 4.2%, down from previous highs. This softer growth environment reduces overheating risks, allowing the central bank to consider earlier rate cuts from its current policy rate of 6.25%. The NBR had previously implemented one of Eastern Europe's most aggressive tightening cycles, raising rates by 575 basis points between 2021 and 2023.
Both analyses highlight that these monetary policy shifts occur within a broader Central European context, with peers like Poland and the Czech Republic also in easing cycles. However, each country maintains considerable policy autonomy due to their non-eurozone status. The potential rate cuts are expected to differentially impact sectors like construction and consumer durables, while financial sectors may face pressure on interest margins.
