Hungarian rate-setters raised the central bank’s base rate by 200 basis points, to 9.75 percent, at an extraordinary meeting on Tuesday.
The Council also decided on Tuesday to raise the overnight deposit rate by 200 basis points to 9.25 percent, and the overnight and one-week collateralized loan rates by 200bp to 12.25 percent.
The overnight deposit rate and the collateralized loan rate mark the bottom and the top, respectively, of the central bank’s “interest rate corridor.”
Deputy governor of the National Bank of Hungary (NBH), Barnabás Virág, said after the meeting that continued rising inflation and prolonged inflation risks made it necessary to continue the base-rate tightening cycle.
The NBH continuously monitors developments in financial market risks and stands ready to intervene in a decisive manner using every instrument in its monetary policy toolkit, if necessary, Virág stressed. In the interest of mitigating second-round inflation risks, maintaining tighter monetary conditions for a longer period of time is warranted, he added.
Minutes after the announcement, the forint firmed up by 0.5-0.6 percent to 410.30 forints from 412.25 versus the euro. The dollar went from 411.82 forints to 409.40 after the announcement, while the Hungarian currency strengthened to 415.40 against the Swiss franc from 417.87.
In the past week, the forint dropped to a new historic low against the euro at 417.03.
At the end of June, the central bank raised its base rate by 185 basis points to 7.75 percent, while last Thursday, the bank raised the one-week deposit rate by 200 basis points in response a new record low the previous day.
Featured photo via Ungarn Heute