Hungarian central bank (NBH) rate-setters raised the base rate by 100 basis points to 10.75% at a regular policy meeting on Tuesday.
The NBH Monetary Council had raised the base rate by 200 basis points to 9.75% just two weeks earlier, taking the extraordinary measure at a non-rate-setting meeting to keep the key rate in tandem with the one-week deposit rate. The Council also decided on Tuesday to raise the O/N deposit rate by 100 basis points to 10.25% and the O/N and one-week collateralised loan rates by 100 basis points to 13.25%. The O/N deposit rate and the collateralised loan rate mark the bottom and the top, respectively, of the central bank鈥檚 鈥渋nterest rate corridor鈥�. The base rate is paid on mandatory reserves. 鈥淭he further rise in inflation and persistent inflation risks warrant the decisive continuation of the tightening cycle,鈥� the Council said in a statement released after the meeting. 鈥淭he [NBH] continuously monitors developments in financial market risks as well and stands ready to intervene in a decisive manner using every instrument in its monetary policy toolkit, if necessary,鈥� the policy makers added. The Council reiterated that the tightening cycle will continue 鈥渦ntil 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鈥�. At a press conference after the meeting, NBH deputy governor Barnab谩s Vir谩g said FX swap tenders providing euro liquidity the NBH launched on a daily basis from July 8 to improve monetary policy transmission have been effective, pointing to a 鈥渟ignificant鈥� increase in FX swap yields. Commenting on June inflation 鈥� which reached 11.7% year-on-year 鈥� Vir谩g said repricing during the month was 鈥渁 multiple鈥� of normal levels and noted the impact on headline CPI of food prices. He added that the recent government decision to charge households a market price for above average energy consumption would lift the path of inflation until the measure falls out of the base in a year.
He estimated second-quarter GDP growth reached 6.0%, but pointed to a 鈥渃lear slowdown鈥� from June, while noting rising risks of recession in the global economy. Vir谩g said achieving the inflation target is the central bank鈥檚 鈥減riority鈥�, adding that anchoring inflation expectations is of 鈥渒ey importance鈥�. In the current environment, coordinating fiscal and monetary policy is 鈥渆specially important鈥�, he said, adding that improvement in the fiscal and current-account balances strengthens the effectiveness of monetary policy.
hungarymatters.hu
pixabay
