Hungary Monetary Policy December 2021


Hungary: MNB delivers seventh consecutive rate hike in December; announces further hikes ahead

December 17, 2021

At its 14 December meeting, the Monetary Council of the Hungarian National Bank decided to raise its base rate to 2.40% from 2.10%, marking the seventh consecutive increase. Moreover, the Bank hiked the overnight deposit rate, the overnight collateralized lending rate and the one-week collateralized lending rate by 30 basis points to 2.40%, 4.40% and 4.40%, respectively.

Soaring inflationary pressures and strong upside risks to the inflation outlook, despite moderating economic activity, drove the Bank’s decision. Headline inflation jumped to 7.4% in November, moving further above the Bank’s target range of 3.0% plus or minus 1.0 percentage point, while core inflation stood at 5.3%. The Bank expects inflation to start declining gradually from December, although it sees core inflation rising further ahead. All in all, it expects inflation to return to its tolerance band in Q4 2022, before reaching the 3.0% target in H1 2023.

Looking ahead, the Bank noted that persistently high prices for commodities, rising international freight costs, widening global supply shortages, sustained wage growth and second-round effects are skewing inflationary risks to the upside. Therefore, it reiterated that December’s rate increase will be the seventh of a cycle of hikes which will see further monthly rises until inflation expectations are properly anchored and second-round inflation risks are mitigated.

The next monetary policy meeting is scheduled for 25 January.

FocusEconomics Consensus Forecast panelists are still assessing the latest developments and new forecasts will be released on 11 January.

Author: Massimo Bassetti, Senior Economist

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Hungary Monetary Policy Chart

Hungary Monetary Policy December 2021

Note: Central Bank base rate in %.
Source: Hungarian National Bank (MNB).

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