Interest Rate Hikes in Hungary and Kyrgyzstan

July 27, 2021

A 30-basis point increase in the National Bank of Hungary’s base rate to 1.2% was larger than what analysts were predicting and represents the second such hike in a month. Magyar Nemzeti Bank’s overnight deposit rate was increased from -0.05% to +0.25%. The base rate level is now at its highest level since early 2016. In justifying today’s second straight rate hike, a released statement concludes,”In the decision-makers’ assessment, risks to the inflation outlook remain on the upside. The Council considers it justified to continue the cycle of interest rate hikes by taking firm steps on a monthly basis to ensure price stability, avoid second-round inflationary effects and to anchor inflation expectations. The Monetary Council will continue the cycle of interest rate hikes until the outlook for inflation stabilizes around the central bank target and inflation risks become evenly balanced on the horizon of monetary policy.” CPI inflation in Hungary has risen to 5.3%.

The National Bank of Kyrgyzstan’s policy interest rate was lifted a full percentage point today  to 7.5%, its highest level since April 2016 but still considerably below the currently double-digit rate of CPI inflation there. This was the third rate hike of 2021, following incremental moves of 50 basis points in February and 100 basis points in April.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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