Hungary Monetary Policy


Central Bank unexpectedly raises interest rates

At its latest monetary policy meeting on 29 November, the Monetary Policy Council (MPC) voted to raise interest rates by 25 basis points from 5.25% to 5.50%. The decision marked the first interest rate hike since October 2008 and surprised market analysts, which had the Central Bank maintaining the current monetary policy stance at least until the end of the year. The Bank stated that the move aims to prevent inflation expectations from rising as a result of persistently above-target inflation, which is expected to rise even further in the coming months due to ?significant cost-push shocks hitting the economy.? In particular, the Bank cited an expected increase in processed food prices brought about by higher unprocessed food prices, and possible price increases owing to the recently approved windfall tax on the energy, telecommunications and retail sectors.


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