Hungary raises central bank base rate by 25 bps to 6%

By Richard Connell

New York, Jan. 24 - The Monetary Council of the Magyar Nemzeti Bank raised its central bank base rate by 25 basis points to 6% at its meeting on Monday, according to a news release issued by the bank.

The council judged that the domestic economy of Hungary would continue to recover from recession over the next two years, noting however that output will remain below potential.

Inflation is expected to remain well above the target level of 3% in the coming quarters, driven by significant cost-push shocks to the economy.

The council noted that the main driver of the Hungarian economy will continue to be external demand, as domestic demand remains low and is expected to recover only gradually.

The council raised the rate based on the current strong upside risks to inflation and hinted that future rate hikes were likely.

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