BUDAPEST, March 22 (Reuters) - Hungary's government extended a cap on large commercial bank deposits until the end of the second quarter on Wednesday and imposed restrictions on the transfer of central bank discount bills to curb "unjust" income earned on central bank facilities.
Prime Minister Viktor Orban's government announced a cap on large commercial bank deposits after the National Bank of Hungary launched a quick deposit facility with an 18% interest rate in October to stem falls in the forint.
The measure, under which commercial banks in Hungary cannot pay an interest rate higher than the three-month discount bill yield on deposits by certain large institutional and private investors, had been due to expire at the end of March.
"To further prevent unjust enrichment, the government has extended this deadline until June 30, 2023 and to protect the economy, it has also banned the unrestricted transfer of central bank discount bills," the Economic Development Ministry said.
"The measure will prevent unjust enrichment at the deposit tenders as well as through the central bank's new discount bill facility," it said in a statement, adding that the changes would also improve the functioning of the government bond market.
The bank, which left all key interest rates unchanged last month, defying government pressure to reduce borrowing costs, offered 1 trillion forints worth of short-term discount bills on Tuesday as part of efforts to strengthen monetary transmission.
The NBH said in February it needed to maintain its 18% one-day deposit rate to curb inflation, adding that changing the base rate was not on the agenda as the bank focused on long-term improvements in risk assessment.
The European Commission forecasts Hungarian inflation at 16.4% in 2023, the highest in the EU. The NBH is due to hold its monthly policy meeting next Tuesday. (Reporting by Gergely Szakacs, Editing by William Maclean)
