Hungary raises benchmark rate to 10.75 pct

BUDAPEST, July 27– The Hungarian National Bank has raised the central bank base rate by 100 basis points to 10.75 percent, effective from Wednesday. In a statement, the bank said that the Russia- Ukraine conflict, a possible new wave of COVID-19, high commodity prices and ongoing disruptions in supply chains increase recession risks in the global economy and all “…

BUDAPEST, July 27 (Xinhua) — The Hungarian National Bank (MNB) has raised the central bank base rate by 100 basis points to 10.75 percent, effective from Wednesday.

The base rate is now at its highest level since the end of 2008.

In a statement, the bank said that the Russia-Ukraine conflict, a possible new wave of COVID-19, high commodity prices and ongoing disruptions in supply chains increase recession risks in the global economy and all “point to a prolonged period of high external inflation.”

The MNB will continue to stand ready to respond “quickly and flexibly” by setting the interest rates if warranted by the rise in short-term risks in financial and commodity markets, it added.

This is the second rate hike by MNB in a month. It decided to raise the central bank interest rates by 200 basis points on July 12 in order to avoid the risk of permanent inflationary effects and threats to price stability. It was an extraordinary hike, as the MNB’s rate setting sessions are normally held at the second monthly meeting of the Monetary Council, at the end of the month.

This is also the fifteenth rate hike by MNB since June 2021. The rate has been steadily increasing since then, in line with the growing inflation rate.

According to the latest official data, the inflation rate in Hungary stood at 11.7 percent in June, well over the 3-percent target set by the MNB. The central bank forecast an 11-12.6 percent inflation rate for this year.

On Tuesday, the MNB also raised the overnight (O/N) deposit rate by 100 basis points to 10.25 percent, and the O/N and the one-week collateralized lending rates by 100 basis points to 13.25 percent. Enditem