National Bank Raises Base Rate by 100 Points

The Monetary Council of the National Bank of Hungary (MNB) raised the base rate by 100 basis points to 4.4% this Tuesday, and pushed up the interest rate corridor by a similar amount.

MNB says in a statement that its primary objective is to achieve and maintain price stability. Without prejudice to its primary objective, the National Bank of Hungary preserves financial stability and supports the Government’s economic policy, as well as its policy on environmental sustainability.

The Russia-Ukraine war that broke out at the end of February fundamentally changed the global economic outlook. Due to the geographical proximity and a larger share of trade with the two parties involved, the events are expected to have a greater effect on the European economy, especially in the Central and Eastern European region. Reaching decade highs, inflation continued to rise in a number of countries. The war is causing additional inflationary effects through rises in commodity and energy prices, which have been aggravated by a repeated increase in supply disruptions.

Global investor sentiment has deteriorated sharply due to the war. Risk appetite has been driven by news on the war, rising commodity and energy prices, an increase in inflation risks, central banks’ monetary policy responses, and the consequences of the coronavirus pandemic. As a result of the war and the sanctions imposed on Russia, commodity prices have been exceptionally volatile since the previous interest rate decision: global oil prices have first risen to an eight-year peak of nearly USD 130 before adjusting, accompanied by high volatility. Gas prices in Europe have risen to their historic peak in the period, the statement says.