State of alarm in Hungary: Central bank raises monetary reference interest rate to almost 3%, above expectations

By Emea Riga
Magyar Nemzeti Bank (MNB) has raised interest rates again. The current decision is in line with the tightening cycle announced so far, and the central bank will soon reveal more details about the higher-than-expected increase in the interest rate.
The interest rate on overnight deposits will be 2.90 percent, and the interest rate on overnight and one-week secured loans will be 4.90 percent.
The increase is above the expectations of analysts and demonstrates the difficulties that the country’s economy is facing after the galloping price increase. This is despite PM Viktor Orban’s populist announcements that the Hungarian economy and the standard of living of the population are better than
BNB raises benchmark interest rate for eighth straight month due to out-of-control inflation
The interest rate has risen from 2.4% to 2.9%, the highest level in eight years and above analysts’ estimates.
The Central Bank of Hungary also raised the ceiling for the interest rate corridor from 4.4% to 4.9%.
BNB is the first central bank in the European Union to start raising the cost of credit since the onset of the coronavirus pandemic.
In December, the annual inflation rate in Hungary stood at 7.4%, the highest level in 14 years, even though the NBH estimated a slowdown.
Core inflation, ie what remains after prices for volatile goods, such as energy and food, are eliminated, has reached its highest level in 20 years.
Analysts expect the Hungarian economy’s growth to slow to 4.8% this year from a level of more than 6% expected in 2021, while the annual inflation rate during the year would rise to 5.5% from 5 , 1%, the highest level since 2012.
The Budapest press is of the opinion that the MNB has been moving from a free central bank to an increasingly conservative central bank for some time, following the fight against inflation.