The Monetary Council of the National Bank of Hungary (NBH) decided to raise the central bank base rate by 30 basis points to 0.90% at a monthly policy meeting on Tuesday.
Central bank policymakers had earlier flagged a possible rate rise at the monthly policy meeting in June against the backdrop of spiking inflation. NBH policymakers had kept the base rate on hold at 0.60% since last summer, but inflation reached 5.1% in both April and May, well outside of the +/- one-percentage-point tolerance band around the central bank’s 3.0% mid-term target. The Council also decided to leave the overnight deposit rate at -0.05% and the overnight and one-week collateralised loan rates at 1.85%.
In a statement, the Council said it “launched a cycle of interest rate hikes to ensure price stability, to prevent inflation risks from having long-lasting effects and to anchor inflation expectations”. Noting that risks to the inflation outlook “remain on the upside”, the Council said it would assess the need to further tighten monetary conditions. It said the cycle of interest rate hikes would continue “until the outlook for inflation stabilises around the central bank target and inflation risks become evenly balanced on the horizon of monetary policy”.