Hungary Monetary Policy


Hungary: Central Bank raises interest rates again

December 20, 2010

At its latest monetary policy meeting on 20 December, the Central Bank raised the base rate by another 25 basis points from 5.50% to 5.75%. The increase followed on an unexpected 25-basis-point hike in late November. The Bank reaffirmed its intention to prevent inflation expectations from rising as a result of ?significant cost-push shocks hitting the economy?, which have kept inflation persistently above the 3.0% target. In particular, monetary authorities stated inflation was being pushed up by higher prices for unprocessed food, which were filtering into the price of processed food. Moreover, the recently approved windfall tax on the energy, telecommunications and retail sectors is also likely to contribute to higher inflation. The Central Bank currently projects inflation to end the year at 4._%, which is above its 3.0% inflation target (+/- 1.0% tolerance margin).


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