Hungary Monetary Policy April 2022


Hungary: MNB hikes rates again in May

June 2, 2022

At its 31 May meeting, the Monetary Council of the Hungarian National Bank (MNB) decided to raise its base rate to 5.90% from 5.40%, marking the 12th consecutive increase. Moreover, the Bank increased the overnight deposit rate, the overnight collateralized lending rate and the one-week collateralized lending rate by 50 basis points each, to 5.90%, 8.90% and 8.90%, respectively.

Soaring inflationary pressures and significant upside risks to the inflation outlook, amid the ongoing war in Ukraine, led the Bank to tighten its stance again. Headline inflation accelerated to 9.5% in April from 8.5% in March, moving further above the Bank’s target range of 3.0% plus or minus one percentage point. Moreover, core inflation recorded a double-digit 10.3% print in the same month. The Bank expects inflation to increase further in the coming months and start to decline gradually only in the autumn.

Looking ahead, the Bank sees upside risks to inflation stemming from global supply disruptions, higher energy and food prices, 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, explaining that “maintaining tighter monetary conditions for a longer period is warranted”.

The next monetary policy meeting is scheduled for 28 June.

FocusEconomics Consensus Forecast panelists are still assessing the latest developments and new forecasts will be released on 7 June.

Author: Massimo Bassetti, Senior Economist

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