Hungarian Parliament building

Hungary Monetary Policy January 2022

Hungary: MNB delivers eighth consecutive rate hike in January; announces further hikes ahead

At its 25 January meeting, the Monetary Council of the Hungarian National Bank decided to raise its base rate to 2.90% from 2.40%, marking the eighth consecutive increase. Moreover, the Bank hiked the overnight deposit rate, the overnight collateralized lending rate and the one-week collateralized lending rate by 50 basis points to 2.90%, 4.90% and 4.90%, respectively.

Strong inflationary pressures and marked upside risks to the inflation outlook, coupled with robust economic activity, drove the Bank’s decision. Headline inflation came in at 7.4% in December, remaining notably above the Bank’s target range of 3.0% plus or minus 1.0 percentage point, while core inflation stood at 6.4%. The Bank expects headline inflation to start declining gradually in the coming months, although it sees core inflation rising further ahead due to higher commodity prices and strong wage growth.

Looking ahead, the Bank noted that high prices for energy and commodities, elevated international freight costs and accelerating wage growth could translate into considerable second-round effects and skew inflationary risks to the upside. Therefore, the Bank reiterated that it would continue to raise monthly rates until inflation expectations are properly anchored and second-round inflation risks are mitigated.

The next monetary policy meeting is scheduled for 22 February.

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