The National Bank of Hungary lowered its base rate by 25 basis points to 5.75% at its July 2026 meeting, in line with market expectations and extending its easing cycle. The decision came as annual inflation eased to 1.7% in June from 1.8% in May, remaining below the central bank's 2%-4% target range for a second consecutive month, providing room for further monetary easing. Governor Mihaly Varga indicated that one additional rate cut could be delivered over the summer before the central bank reassesses the outlook alongside updated macroeconomic projections in September. However, the forint has weakened by nearly 2% against the euro since the previous meeting amid renewed geopolitical tensions, increasing upside risks to inflation through higher energy import costs. Looking ahead, the domestic risk assessment is influenced by expectations regarding the fiscal path and the introduction of the euro, as well as developments in the Middle East conflict.