Hungary: MNB hikes rates again in July
At its 26 July meeting, the Monetary Council of the Hungarian National Bank (MNB) raised its base rate to 10.75% from 9.75%, marking the 15th consecutive increase. Moreover, the Bank increased the overnight deposit rate, the overnight collateralized lending rate and the one-week collateralized lending rate by 100 basis points each, to 10.25%, 13.25% and 13.25%, respectively.
The Bank continued to tighten its stance due to soaring inflation and a further intensification of upside inflation risks amid the ongoing war in Ukraine. Headline inflation accelerated to 11.7% in June from 10.7% in May, moving further above the Bank’s target range of 3.0% plus or minus one percentage point. Moreover, core inflation rose to 13.8% in the same month, from 12.2% in May. The Bank expects inflation to increase further in the coming months, peaking in autumn and then declining gradually. Inflation is seen reaching the 3.0% target only in H1 2024.
Looking ahead, the Bank sees mounting upside risks to inflation stemming from persistently high commodity and energy prices, supply disruptions and second-round effects. These dynamics are being aggravated by the Russia-Ukraine war. The Bank, therefore, reiterated that it will continue to raise rates to anchor inflation expectations and mitigate second-round inflation risks, reiterating that “maintaining tighter monetary conditions for a longer period is warranted”.
The next monetary policy meeting is scheduled for 30 August.