Hungary hikes base rate by 50 bps to 7% as CPI could jump next year

By Susanna Moon

Chicago, Dec. 20 - The Monetary Council of Hungary's Magyar Nemzeti Bank voted to raise the central bank base rate by another 50 basis points to 7%, effective Wednesday, at its meeting on Tuesday. The rate hike comes after a 50-bps increase in November.

The council said it needed to raise interest rates due to the inflation outlook as well as growing economic risks.

"Inflation can be brought back to 3% by early 2013 by maintaining a tight monetary policy," the bank said in a press release.

The Consumer Price Index is likely to jump next year due to the increases in VAT and excise duties, the bank said.

The Hungarian economy is likely to be stagnant next year, with growth expected to resume in 2013.

The bank also said the euro-area debt crisis has made it more expensive for Hungarian banks to roll over their external funding.

The abridged minutes of the council meeting will be published on Jan. 11.

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