Hungarian rate-setters raised the central bank’s base rate by 200 basis points, to 9.75%, at an extraordinary meeting on Tuesday.
The Council also decided on Tuesday to raise the O/N deposit rate by 200 basis points to 9.25% and the O/N and one-week collateralised loan rates by 200bp to 12.25%. 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 forint traded at 410.59 to the euro around 15 minutes after the decision was announced, firming from 412.18 a little before 1pm.
National Bank of Hungary deputy governor 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 said. In the interest of mitigating second-round inflation risks, maintaining tighter monetary conditions for a longer period of time is warranted, he added.