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Financial News: Hungary Central Bank Lifts Rate By 100 Bps;

Hungary Central Bank Lifts Rate By 100 Bps; Signals Additional Tightening

08/30/2022 - 09:48:00 (RTTNews)

(RTTNews) - Hungary's central bank raised its benchmark rate by 100 basis points and hinted at additional tightening until inflation stabilizes around the target in a sustainable manner.

The Monetary Council, led by Governor Gyorgy Matolcsy, hiked the base rate by 100 basis points to 11.75 percent.

The overnight deposit rate was increased by 100 basis points to 11.25 percent, and the overnight and the one-week collateralised lending rates were increased by 100 basis points to 14.25 percent.

The central bank has raised the key interest rate in every policy session since June last year.

The further rise in inflation and persistent inflation risks warrant the decisive continuation of the tightening cycle, the bank said in the statement.

"The Monetary Council will continue the cycle of interest rate hikes until the outlook for inflation stabilises around the central bank target in a sustainable manner and inflation risks become evenly balanced on the horizon of monetary policy," the bank said.

It is clear that the central bank is struggling to contain very strong and broad-based price pressures, Capital Economics economist Liam Peach said. The economist expects interest rates to reach 13.50 percent by year-end. The MNB is particularly concerned about the inflationary consequences and second-round effects given the speed and size of the FX pass-through in Hungary and the sensitivity of household inflation expectations, the economist noted.

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