Hungarian rate-setters raised the central bank base rate by 100bp
Hungarian rate-setters raised the central bank base rate by 100 basis points to 4.40 percent at a monthly policy meeting on Tuesday.
The members of the Monetary Council also decided to raise the O/N deposit rate by 100 basis points to 4.40 percent and the O/N and one-week collateralised loan rates by 100 basis points to 7.40 percent.
The O/N deposit rate and the collateralised loan rate mark the bottom and the top, respectively, of the central bank’s “interest rate corridor”. The base rate is paid on mandatory reserves.
In a statement released after the meeting, the Council said the Russia-Ukraine war has “posed a much higher risk than usual” to the outlook for inflation.
The increase in inflation risks warrants a further tightening of monetary conditions.
Consequently, the Monetary Council deems it necessary to continue the general tightening of monetary conditions and to continue the base rate tightening cycle by a larger increment than before, it added.
The Council said strong negative supply effects were likely to raise inflation in the coming quarter, while higher energy and commodity prices boost inflation further on the expenditure side. Inflation is likely to decline in the second half of the year, the policy makers said, adding that
the short-term path of inflation “will depend on the duration of the war, the extent and persistence of sanctions, as well as government responses”.
The central bank raised its average annual inflation forecast for 2022 to 7.5-9.8 percent, but said CPI is expected to return to the +/-1 percentage point tolerance band around the mid-term 3.0 percent target in the second half of 2023 and reach the target in the first half of 2024.
The NBH augurs a slowdown in GDP growth to 2.5-4.5 percent in 2022, depending on the duration of the war and the policy of sanctions.
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1 Comment
All the componentry that are the Major Core Mechanics – of the Financial & Economic functioning, of the Hungarian Economy, continue to TREND downwards.
This “Trending” continues to display the mounting pressure on this present Government, that could see the Economy of Hungary – being questioned, as to its ability to survive – and not TREND – into a greater serious stage of Depression.
Interest Rate – subject of this article – continue to Rise.
The present Government attempting – “Mea Cupa” with the European Union – Brussels – the level of financial request, to the maximum, that witnesses the present Hungarian Government – requesting the FULL – allocated loan facility, under the Resilience & Recovery Facility.
This request – will amount to a delayed process of DEEP evaluation by the European Union, that may NOT go in the direction nor the requested amount of Funding, being “punted on” – by the present Hungarian Government.
REMEMBER – the European Union – with Hungary under a LARGE Microscope – in the way & process that Hungary has in recent years – disbursed and used European Union Funding – to expect the European Union to meet these latest requests by the Government of Hungary – must be in a category expressed as – Doubtful.
The “que” – in front of Hungary – will be given preferential treatment – that numbers of member countries of the European Union would agree is – Rightful.