125-Basis Point Hungarian Base Rate Hike Exceeds Expectations

September 27, 2022

Hungary’s central bank base rate has been raised by a further 125 basis points to 13.0%. Although greater than analysts were anticipating, the increase didn’t keep pace with the 1.9 percentage point acceleration of Hungarian CPI inflation to 15.6% in August from 13.7% in July and 4.9% in August 2021. The base rate had been lifted during the final seven months of 2021 from a pandemic low of 0.60% to 2.4%. Additional increases in every month of the first half of 2022 totaled 535 basis points, and today’s hike was the fourth since midyear, resulting in a further combined increase of 525 basis points. Monetary officials are trying to reduce inflation but also attempting to halt the depreciation of the Hungarian forint, which has dropped 6.6% in the past fortnight and 27.3% against the dollar since September 27, 2021.

The U.S. Republican Party election campaign theme for November is that inflation has shot up under Biden, but it is the party of price stability. In fact, inflation has soared in many countries like Hungary where political rule has moved even farther away from democracy than in the United States. Texas Republicans are so enamored with Hungarian politics that they invited Prime Minister Victor Orban to the Conservative Political Action Conference held in Dallas last month.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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