Hungary still has one of the highest interest rates in the European Union, and the case for keeping it that high just got a lot weaker.
Inflation came in below target, the forint rallied, and one of the bank's own deputies told markets that a June cut is now in play.
The National Bank of Hungary held its base rate at 6.25% on Tuesday, leaving the deposit rate at 5.25% and the lending rate at 7.25%. That makes three meetings in a row without a move.
The vote split this time. Governor Mihaly Varga gave the official line about watching corporate price changes and market stability, while a deputy gave the real read - the improving inflation outlook could let the bank cut next month.
Hungary's inflation hit 2.1% in April, which sits well below the bank's 3% target. Holding a 6.25% rate against 2% inflation is a tough position to defend for much longer.
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The forint has rallied this year, which makes imports cheaper and cools inflation without the bank having to lift a finger.
Think of it like a co-pilot - the bank has been steering on its own for more than a year, and now the currency is helping out, which gives the bank room to ease off.
A Reuters poll of economists expects 50 basis points of cuts by year-end, meaning the market is already pricing in the pivot.
For investors watching the broader trade, the top emerging market ETFs have been moving with central bank pivots like this all year.
The next meeting falls in June, when the bank will publish fresh inflation projections - if those forecasts come in soft, the cut goes from likely to nearly locked in.
Plenty of emerging market central banks have held for too long this cycle and watched their currencies wobble when they finally moved, so Hungary is trying to time it better.
For now, the bank is holding while the market is already trading the cut.
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