BUDAPEST: Hungary's central bank will raise interest rates further to combat high inflation, Deputy Governor Csaba Kandracs told news website napi.hu in an interview published on Friday.
The National Bank of Hungary (NBH) raised its base rate by 30 basis points to 2.4% on Tuesday, its highest level since May 2014, and pledged further rate hikes next year in order to anchor rising inflation expectations.
The NBH followed up that move with a 30 bps increase to 3.6% in its one-week deposit rate, the tool the bank uses to tackle short-term financial market volatility, its fifth weekly increase in a row.
Despite the monetary tightening, the forint is trading about one percent off a record low of 372 versus the euro hit last month.
"We must prepare for a protracted battle against inflation," Kandracs was quoted as saying in the interview. "Timing, consistency and determination will be key to success. We will continue to do what needs to be done."
Hungarian headline inflation rose to a 14-year high of 7.4% in November, while the central bank's preferred measure of lasting price trends rose to 5.3%, both sharply above its 2% to 4% target range.
Kandracs said price growth would fall back to within the central bank's target range late next year.
"Core inflation, however, will only start declining substantially from the second half of 2022, that is why we need further rate hikes," he said.
Asked about the falls in the forint, Kandracs said the foreign currency market was a key part of monetary transmission.
"After its last meeting, the Monetary Council emphasised that it aims to wrestle down inflation as soon as possible with all tools available and on all channels of monetary policy transmission," Kandracs was quoted as saying.
"We will strongly adhere to that."
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