Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Hungary lifts key rate further on eye-watering inflation forecast

Economy Jun 30, 2022 04:50AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A view of the entrance to the National Bank of Hungary building in Budapest,Hungary February 9, 2016. REUTERS/Laszlo Balogh

BUDAPEST (Reuters) - Hungary's central bank hiked its one-week deposit rate by 50 bps to 7.75% at a tender on Thursday as its raised its forecast for tax-adjusted core inflation, its preferred measure of lasting price trends, to an eye-watering 13%-14% this year.

The National Bank of Hungary (NBH) raised its base rate by a whopping 185 basis points to 7.75% on Tuesday, delivering its biggest rate rise since the start of the global financial crisis in 2008 to shore up the forint.

On Thursday, it followed up that increase with a 50 bps hike in the one-week deposit rate, its facility designed to tackle short-term financial market volatility, closing the spread between the two rates in line with its earlier pledge.

The NBH lifted its 2022 tax-adjusted core inflation forecast from 7.9% to 9.4% seen just three months ago, projecting a retreat to 6.6% to 8.2% next year, still sharply above its 2% to 4% policy target range.

The NBH also projects private sector gross wage growth at 13.2% to 13.8% this year and at 8.8% to 9.9% next year, which it said could pose further upside risks to inflation.

"Since there is strong competition for skilled labour force in all sectors, robust wage growth is likely to persist, which increases the risk of rising underlying inflation developments," it said.

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 (NYSE:MS) 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 395, paring some of its gains.

Hungary lifts key rate further on eye-watering inflation forecast
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email