Part I — Situation overview

On the Hungarian financial market a rare phenomenon unfolded at the end of May 2026: the forint became one of the region’s best-performing currencies, demand for Hungarian government bonds is strong, and investors are demanding an ever smaller premium for Hungarian risk. According to an analysis in Telex’s G7 section (the author is the investment director of the Amundi fund manager) the Hungarian risk premium — in technical terms the risk premium, that is, the excess yield investors demand for Hungarian assets relative to an asset considered safe — has fallen significantly since the March rate-setting meeting. So much so that the ten-year Hungarian government bond today pays a lower yield premium than Polish paper rated two-to-three notches higher — there has been no example of this since the Covid crisis.

What lies behind the turn? Several factors at once. The new government postponed the phase-out of certain price-regulating instruments, fresh inflation data fell short of the earlier forecast, the forint strengthened further, and — according to the trigger of topic 2 — the Monetary Council of the Hungarian National Bank (MNB, the central bank) held the base rate unchanged at 6.5 per cent, while the forint strengthened below 380 against the euro. To this was added the positive news about the release of EU funds, which also improves the budget’s investor assessment. The market is pricing in four rate cuts of 25 basis points (0.25 percentage points) each over the next year — a historically cautious path — and, based on the central bank’s communication, in the June inflation report it may already weigh an expansion of its room for manoeuvre.

In MIAK’s reading the picture is encouraging, but the assessment counsels caution. One important legal-institutional point should be recorded: the rate decision is the independent competence of the MNB’s Monetary Council — the central bank is independent, and the government cannot instruct it. Behind the market optimism, moreover, lies not chance but the credibility of the fiscal path; the question is what economic policy does with this opening but not guaranteed-to-be-lasting window of confidence.

Part II — Literature audit

The nature of the current rally is illuminated by two economics classics. The main thesis of Carmen Reinhart and Kenneth Rogoff (Harvard economists, researchers who processed eight centuries of the history of financial crises) is that calm, optimistic periods regularly make decision-makers and investors believe that “this time is different” — and it is precisely this illusion that leads to the next crisis; sudden, large capital inflows constitute a separate risk. Olivier Blanchard (French macroeconomist, the IMF’s former chief economist), in his analysis of the 2008 crisis, showed how quickly and in a self-reinforcing manner investor confidence and the risk premium turn around if the policy direction becomes uncertain. The common lesson of the two propositions for the Hungarian situation: the favourable premium and the strengthening of the forint are real, but not self-propelling — their durability is provided by credible, predictable economic policy, not by market mood. The detailed literature treatment — by author, with quotations — can be found in section 6.4 Literature in detail.

Part III — MIAK’s concrete proposal

MIAK proposes three measurable principles, so that the good financial-market period becomes a lasting advantage.

3.1 Do not spend the window of confidence — countercyclical logic (immediate start)

According to MIAK the strengthening of the forint and the low premium must not be used for additional spending; on the contrary, this is the right moment for building reserves and reducing the public-debt ratio. This is directly the principle of G15 (countercyclical fiscal stabiliser — state spending in a downturn, reserve-building in an upturn). Under the current favourable financing conditions the state can refinance its maturing debt more cheaply; this saving should be used not for new spending, but for improving the deficit and the debt path. The logic is simple: set aside in good times, so that there is something to spend in bad times — otherwise the next shock will find us, just as before, with a high premium and a weak forint.

3.2 A credible medium-term fiscal path for public-debt sustainability

The source of market confidence is the credibility of the budget. MIAK therefore proposes, along G23 (public-debt-sustainability framework), that the government put down a quantified, medium-term consolidation path that predictably reduces the budget deficit target (the annual general-government deficit fixed in advance as a share of GDP — gross domestic product). According to the president of the Fiscal Council the deficit forecast has already been raised to 6.8 per cent; MIAK’s position is that this level should not be increased but reduced along a credible timetable — and it is precisely the current favourable financing environment that gives the opportunity for this. Within the framework of the data-driven budget (G1) the fulfilment of the path should be publicly trackable.

3.3 Financial-stability monitoring — the rally should not conceal structural risk

The third proposal is about the vigilant monitoring of risks. Within the framework of G22 (financial-stability monitoring and shadow-bank regulation) and G29 (system-critical monitoring of the financial system), MIAK holds that the favourable financial-market mood should not suppress the continuous analysis of structural risks — an external energy-price shock, a global rate turn, a possible reversal of the forint’s strengthening. A single principle ties the three proposals together: the good financial-market period becomes a lasting national advantage if it is accompanied by deliberate, countercyclical, risk-aware economic policy — and not by the euphoric spending of the favourable mood.

Part IV — Expected impacts and risks

Dimension Expected impact Risk
Economy Cheaper public-debt financing, reviving lending, corporate bond issuance; lower rates If the saving is spent, the window of confidence closes without the debt path improving
Society Cheaper credit and a strong forint reduce household burdens and the price of imports Too strong a forint may worsen exporters’ competitiveness and jobs
Public administration A predictable, quantified fiscal path can institutionalise responsible management The central bank’s independence coming under political pressure threatens an immediate jump-back of the premium

The main dilemma is timing. The rate cut and the strengthening of the forint are favourable in the short term, but — as the literature frame warns — calm periods tend to lull caution to sleep. The proposal tips to the risk side if economic policy treats the current good mood as a lasting state, and uses the opening room for manoeuvre for new spending. Conversely: if we use the window of confidence for debt and deficit reduction, the favourable premium can be made more durable, and a next shock can also be managed at a lower cost.

Part V — Measurability and summary

5.1 What is worth tracking? (suggested performance indicators)

MIAK proposes monitoring the following performance indicators (KPIs, in English Key Performance Indicator):

  • the yield premium of the ten-year Hungarian government bond relative to the German paper and to regional peers (target: a durably low level);
  • the budget deficit as a share of GDP (target: the 6.8 per cent forecast does not rise, then falls);
  • the GDP-proportional path of public debt (target: a declining trend in the favourable financing environment);
  • the stability of the forint’s exchange rate without extreme fluctuation.

5.2 Summary

MIAK’s message to the decision-maker: the financial-market rally is a real opportunity, but the request is that this window of confidence be used for debt reduction and reserve-building, not for new spending — and that the government put down a credible, quantified medium-term fiscal path. To the public: the strong forint and cheaper credit are good news, but their durability is provided by a responsible budget, not by the mood of the moment. All this moves two MIAK foundational values. Data-drivenness, because the proposal stands or falls not on promises but on measurable indicators (premium, deficit path, debt ratio) — MIAK holds economic policy to account on these numbers. And accountability, because the respect of central-bank independence and a publicly trackable fiscal path are what place market confidence on an institutional basis, not on political goodwill.

Part VI — Justifications and further sources

6.1 Press framing by spectrum

The financial-market topic typically appeared in the economic and public-affairs band, with less of a political edge. The analytical section of the left-liberal/public-affairs band (Telex G7, with a guest article by Amundi’s investment director) put the fall of the risk premium and the chance of a rate cut at the centre, emphasising that “it has not happened many times in the past twenty years that the MNB could cut the rate while the rest of the world’s central banks tighten”. The economic band (Portfolio) and Index followed the development of the forint and government-bond market (for these two sources the article URL points to the section or the front page — only a title-level reference). HVG’s weekly economic summary embedded it in the broader picture: the release of EU funds and the favourable financial-market mood together improve the budget’s assessment. The pro-government/conservative band gave the financial-market rally less top focus on this day. For MIAK the lesson is that the facts (strong forint, falling premium, chance of a rate cut) are common; the question is not whether the news is good, but what economic policy does with it.

6.2 Facts and data

  • MNB base rate: 6.5 per cent (the Monetary Council held it unchanged). (Source: MIAK press monitor 31 May 2026; Telex G7.)
  • Forint: strengthened below 380 against the euro, one of the region’s best-performing currencies.
  • Risk premium: the premium of the ten-year Hungarian government bond, for the first time since the Covid crisis, below that of the higher-rated Polish paper.
  • Market pricing: 4 × 25 basis points of rate cuts over the next year; the first cut possible from June.
  • Budget deficit forecast: 6.8 per cent (according to the president of the Fiscal Council, HVG interview).

6.3 Policy aspects

  • Economics (programme points) — the topic is the intersection of financial stability and public-debt sustainability:
    • countercyclical fiscal stabiliser (G15) — using the favourable period for reserve-building;
    • public-debt-sustainability framework (G23) — a credible medium-term path;
    • financial-stability monitoring (G22) and system-critical monitoring (G29) — the vigilant monitoring of risks;
    • data-driven budget (G1) — the public trackability of the path.

6.4 Literature in detail

6.4.1 Carmen Reinhart and Kenneth Rogoff: This Time Is Different

The main message of the authors’ work processing eight centuries of financial crises is that calm periods regularly make actors believe that the old rules no longer apply — and that this is precisely the trouble. The thesis sentence:

“Major default episodes are typically spaced some years (or decades) apart, creating an illusion that »this time is different« among policymakers and investors.”

The authors separately highlight that “countries experiencing sudden large capital inflows are at high risk”. In the case of the Hungarian financial-market rally this does not mean that the turn is not real — but that the favourable premium and forint strengthening must be handled cautiously, by reinforcing the credible fiscal path, not with euphoria.

📖 Source: Carmen Reinhart – Kenneth Rogoff: This Time Is Different (NBER Working Paper, 2008)

6.4.2 Olivier Blanchard: The Crisis (IMF, 2009)

In his analysis of the 2008 financial crisis Blanchard showed how self-reinforcingly investor confidence and the risk premium move, and what role policy predictability plays in this. His observation:

“Uncertainty about the course and the details of policy has made private investors hesitant.”

In the Hungarian situation this grounds proposal 3.2: the current favourable premium stays durable precisely if the government gives a predictable, quantified fiscal path — for uncertainty is the fastest driver-up of the premium.

📖 Source: Olivier Blanchard: The Crisis: Basic Mechanisms and Appropriate Policies (IMF Working Paper WP/09/80, 2009)

6.5 International comparison

The regional comparison is itself telling: the Hungarian ten-year premium fell, for the first time since the Covid crisis, below that of Polish paper rated two-to-three notches higher. In the short term this is a sign of reinforced confidence, but the lasting advantage — as the Polish and Czech experience also shows — stems from a credible fiscal rule-set and an independent central-bank frame, not from the mood of the moment. MIAK therefore considers the benchmark of regional catch-up to be not the daily premium, but institutional predictability.

Economics

  • G15 — Countercyclical fiscal stabiliser
  • G23 — Public-debt-sustainability framework
  • G22 — Financial-stability monitoring and shadow-bank regulation
  • G29 — System-critical monitoring of the financial system
  • G1 — Data-driven budget

6.7 Source register

Press sources (MIAK press monitor, 31 May 2026 — topic 2):

Knowledge-base references (literature):

  • 📖 Carmen Reinhart – Kenneth Rogoff: This Time Is Different (NBER WP, 2008)
  • 📖 Olivier Blanchard: The Crisis (IMF WP/09/80, 2009)

Note: the local file path of the books does not appear in the visible text of the blog — only the author and the title.

MIAK internal materials:

  • MIAK policy area: Economics (programme points; programme point ID: G23)
  • MIAK press monitor, 31 May 2026 — topic 2, score: 84/100

Additional public data sources:

  • MNB Monetary Council communiqués; ÁKK (Government Debt Management Agency) auction results; MNB Financial Stability Report; Eurostat public-debt statistics.

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