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Hungary central bank raises one-week deposit rate by 50 bps to 7.75%

06/30/2022 | 03:29am EDT
FILE PHOTO: A view of the entrance to the National Bank of Hungary building in Budapest

BUDAPEST (Reuters) - Hungary's central bank raised its one-week deposit rate by 50 bps to 7.75% at a weekly tender on Thursday, as flagged by the bank on Tuesday after its rate meeting where it hiked its base rate by 185 bps in a bid to curb surging inflation.

With Thursday's fresh rate hike the base rate and the one-week deposit rate are now at the same level.

The National Bank of Hungary (NBH) raised its base rate by a whopping 185 basis points to 7.75% on Tuesday, ramping up the pace of hikes after the forint plunged to a record low on Monday.

The bank's deputy Governor Barnabas Virag said the bank needed "every percentage point and basis point" to reach its 3% inflation target, which is expected to happen in 2024.

The bank raised its 2022 inflation forecast to 11-12.6% from 7.5-9.8%, and also raised its 2023 projection even though the government has put in place price caps on fuels, basic foodstuffs and households' energy bills.

The NBH has also pledged more, and decisive rate hikes to come saying that fending off second-round inflation impacts and anchoring expectations was paramount.

"We now see the NBH hiking its base rate to 10% against 8.90% previously by end-3Q22, most likely in a front-loaded manner," Morgan Stanley said in a note.

The bigger-than-expected rate hike on Tuesday helped shore up the forint, which plunged to record lows of 404.50 versus the euro on Monday. By Thursday the currency firmed to 393.75.

(Reporting by Krisztina Than; Editing by Toby Chopra)


© Reuters 2022
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