Hungary Central Bank Raises Rates For Fourth Time In Two Weeks

Hungary’s central bank unexpectedly raised interest rates for the fourth time in just two weeks on Tuesday amid a surge in inflation that has put increased pressure on the forint and its bond market.

The National Bank of Hungary was the first European Union central bank to start raising interest rates in June to combat growing price pressures amid a faster-than-expected recovery from the coronavirus pandemic.

Despite growing evidence of strong inflationary pressures, however, the bank slowed the pace of rate rises in September in what some analysts have called a mistake before ramping up the pace of tightening again at its regular meeting this month.

The NBH has raised its base rate by a combined 150 basis points since June, but more aggressive rate hikes early this month by the Czech and the Polish central banks increasingly made the NBH look an outlier in the region.

On Tuesday, at a non-rate-setting meeting, the bank raised its collateralized loan rate by 105 basis points to 4.1% and the overnight deposit rate by 45 basis points to 1.6%, widening its interest rate corridor and creating room for itself to act.