Hungarian Central Bank Hikes Rate by a Whopping 185bps to Combat 20-Year High Inflation

The National Bank of Hungary (NBH) made a shocking move on Tuesday by raising its base rate by a whopping 185 basis points to 7.75%, which was way above expectations of 6.4%.

Deputy Governor Barnabas Virag said in a news conference that the most important task for the government is to fend off second-round inflation impacts and anchor expectations.

The continued rise in inflation and persistent inflation risks resulted in a continuation of the Hungarian central bank’s tightening cycle.

Hungary has been battling with rising inflation that topped 10.7% in May, the first double figure reached in 20 years. The figure was up from 9.5 percent in April and a forecast of 10.5% by economists.

The Hungarian central bank was the first to lead the EU to hike its interest rates post Covid-19 pandemic in 2021.