Hungary: MNB delivers sixth consecutive rate hike in November; announces further hikes ahead
November 17, 2021
At its 16 November meeting, the Monetary Council of the Hungarian National Bank decided to raise its base rate to 2.10% from 1.80%, marking the sixth 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 1.15%, 3.05% and 3.05%, respectively.
Rising inflationary pressures and considerable upside risks to the inflation outlook, despite a cooling recovery, were behind the Bank’s decision. Headline inflation rose to 6.5% in October, moving further above the Bank’s target range of 3.0% plus or minus 1.0 percentage point, while core inflation stood at 4.7%. The Bank expects inflation to continue increasing in November, before slowing gradually next year. Meanwhile, on the growth front, activity lost steam in Q3, and the Bank expects the economy to expand between 5.0% and 6.0% in 2022.
Looking ahead, the Bank noted that persistently high prices for commodities, rising international freight costs, ongoing global supply shortages, strong wage growth and second-round effects represent the main upside risks to inflation. Therefore, it outlined that November’s rate increase will be the sixth 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 14 December.