The National Bank of Hungary (NBH) raised its key interest rate by 100 basis points to 10.75% on Tuesday, taking borrowing costs into double-digit territory for the first time since late 2008, and signaled that more rate hikes are coming due to rising inflation.
“It is justified to tighten the key interest rate decisively in order to stabilize inflation expectations and mitigate secondary inflation risks,” the rate-setting Monetary Board said in a statement, adding that Hungary’s economy was expected to slow in second half of the year.
Deputy Governor Barnabas Virag said a government decision to remove energy price caps for higher-using households would add 3 percentage points to the expected rate of inflation over the 12-month period to August 2023.
“NBH will continue its interest rate moves until we see a clear recovery in inflation,” Virag said in a briefing, adding that the bank was focusing on containing inflation and spillovers even as the economy was poised to slow. .
“Global recession risks have increased, signs of a slowdown are also visible in the Hungarian economy, but we can assess the pace and size of this slowdown only in the coming months,” he added.
Source: Capital
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