Hungary Monetary Policy June 2022


Hungary: MNB hikes rates again in June

June 30, 2022

At its 28 June meeting, the Monetary Council of the Hungarian National Bank (MNB) decided to raise its base rate to 7.75% from 5.90%, marking the 13th consecutive increase. Moreover, the Bank increased the overnight deposit rate, the overnight collateralized lending rate and the one-week collateralized lending rate by 135 basis points each, to 7.25%, 10.25% and 10.25%, respectively.

The Bank tightened its stance due to surging inflation and a further intensification of upside inflation risks amid the ongoing war in Ukraine. Headline inflation accelerated to 10.7% in May from 9.5% in April, moving further above the Bank’s target range of 3.0% plus or minus one percentage point. Moreover, core inflation rose to 12.2% in the same month, from 10.3% in April. The Bank expects inflation to increase further in the coming months, peaking in autumn and then declining gradually. Inflation is therefore seen at between 11.0–12.6% this year and 6.8–9.2% in 2023. Meanwhile, GDP growth is forecast at 4.5–5.5% in 2022 and at 2.0–3.0% next year.

Looking ahead, the Bank sees mounting upside risks to inflation stemming from persistently high commodity and energy prices, supply disruptions and strong wage growth. 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, explaining that “maintaining tighter monetary conditions for a longer period is warranted”.

The next monetary policy meeting is scheduled for 26 July.

FocusEconomics Consensus Forecast panelists are still assessing the latest developments and new forecasts will be released on 5 July.

Author: Massimo Bassetti, Senior Economist

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