Hungarian central bank raises base rate 30 bp to 0.90 pc

The Monetary Council of the National Bank of Hungary (NBH) decided to raise the central bank base rate by 30bp to 0.90 percent at a monthly policy meeting on Tuesday.

Central bank policy makers had earlier flagged a possible rate rise at the monthly policy meeting in June against the backdrop of spiking inflation.

NBH policy makers had kept the base rate on hold at 0.60 percent since last summer, but inflation reached 5.1 percent in both April and May, well outside of the +/- one-percentage-point tolerance band around the central bank’s 3.0 percent mid-term target.

The Council also decided on Tuesday to leave the O/N deposit rate at -0.05 percent and the O/N and one-week collateralised loan rates at 1.85 percent.

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 base rate is paid on mandatory reserves and preferential deposits.

In a statement released after the meeting, 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”.