Hungary’s central bank saw rate hike by 100 basis points to 12.75% – Reuters poll

Hungary’s central bank saw rate hike by 100 basis points to 12.75% – Reuters poll



By Gergeli Szakas

BUDAPEST (Reuters) – Hungary’s national bank is likely to raise its key interest rate by another 100 basis points to 12.75 percent next Tuesday, with more increases expected by the end of the year despite the bank announcing a possible moratorium, a Reuters poll showed. for its increases.

Economists’ median forecasts show that the National Migration Bank is set to maintain the tightening pace of 100 basis points over the past months as Hungary struggles with a jump in inflation to its highest level in two decades amid rising food and energy costs.

Of the 14 economists who made forecasts, five expected, however, that the bank would slow the pace of interest rate hikes to 75 basis points, bringing the base rate to 12.5%, while one analyst decided to increase it 125 basis points to 13%.

Central Bank Deputy Governor Barnabas Viraj told reporters on Thursday that the National Bank of Bahrain, which has raised its base rate by more than 1,100 basis points since June 2021 to the highest level in Central Europe, may consider ending its rate-raising cycle after Tuesday’s meeting.

He said the bank could raise rates by 50, 75 or 100 basis points, after which “all options are on the table,” including raising the exit rate all at once or ending the cycle in several smaller steps.

β€œWe narrowly favor a 75 basis point hike at the Hungarian National Bank meeting in September, with the base rate and one-week deposit rate raised to 12.50%, although 100 basis points remain on the table,” said ING economist Peter Verovacs.

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“Announcing the prolongation of government price cap measures on basic foodstuffs and fuel will reduce peak inflation in the near term, somewhat reducing concerns about consumer inflation expectations that are becoming more extreme.”

Prime Minister Viktor Orban’s government last week extended caps on fuel and staple foods by three months until the end of the year in a bid to protect families from rising costs.

Even with price caps in place, analysts polled by Reuters see headline inflation at 13.6% this year, rising to 13.95% in 2023 before declining to 4.3% by 2024.

However, economic growth is expected to slow sharply, to just 1.3% next year from 5% expected in 2022, pointing to a stagflation scenario in Hungary as the energy crisis hits major European economies that absorb most of their exports.

A new economic trajectory revealed by Finance Minister Mihaly Varga earlier on Friday showed that the Hungarian economy is on the verge of contraction for several quarters from the end of this year.

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