Hungary’s central bank left its key interest rates unchanged on Tuesday, citing increased inflation risks.
The Monetary Council of the Magyar Nemzeti Bank decided to keep the base rate at 0.60 percent, as economists had expected.
The bank had reduced the rate by 15 basis points each in June and July 2020. The rate cut in June was the first in more than four years.
The overnight central bank deposit rate was retained at -0.05 percent and the one-week collateralized loan rate was maintained at 1.85 percent.
“In the Monetary Council’s assessment, the upside risks related to the outlook for inflation have generally increased,” the central bank said in a statement.
The bank expects a sustained rise in commodity prices and international freight costs to result in a higher external inflation environment.
“Temporary demand-supply frictions due to the rapid restart of the domestic economy, renewed tightening of labor market capacities expected in certain sectors combined with dynamic wage growth have increased inflation risks,” the bank said.
Hungary has one of the top rates of vaccination against the coronavirus in Europe.
The bank expects the restart of the economy to have picked up significantly in the second quarter, as a result of the earlier opening than the European average. This is expected to support a rapid recovery of Hungarian GDP that is forecast to grow in double digits in the second quarter.
Economic growth this year is forecast to be close to the upper end of the March projection band of 4-6 percent.
Hungary’s economic performance is expected to reach pre-pandemic levels no later than in the fourth quarter of 2021, the bank said.
The material has been provided by InstaForex Company – www.instaforex.com