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Financial News: Hungary Hikes Rates Again

Hungary Hikes Rates Again

09/21/2021 - 13:05:00 (RTTNews)

(RTTNews) - Hungary's central bank raised its interest rates in September, for a fourth policy session in a row, and signaled it will continue to do so in coming months, citing rising inflation and upside risks to the outlook. The Monetary Council decided to raise the central bank base rate by 15 basis points to 1.65 percent, the Magyar Nemzeti bank said in a statement. Policymakers also announced a 15-basis point increase in the interest rate corridor, thus the overnight deposit rate was raised to 0.70 percent, while the overnight and the one-week collateralised lending rates were lifted to 2.60 percent. The Monetary Council also decided to reduce the target amount of the MNB's weekly asset purchases from HUF 50 billion to HUF 40 billion from the week starting on September 27. "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 central bank said. The Council also considered it necessary to gradually phase out the foreign-exchange swap facility providing forint liquidity and to tighten the liquidity provided by the instrument.

The central bank expects inflation to rise further and stay above 5 percent for the rest of the year and core inflation is expected to rise to close to 4 percent. The effects of the Bank's tightening cycle will be clearly felt in 2022, the bank said. Inflation is expected to ease from the beginning of next year before returning to the central bank tolerance band in the second quarter. The consumer price inflation is expected to stabilize around the 3 percent central bank target in the second half of 2022.

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