BUDAPEST: Hungary's central bank will continue interest rate hikes in 2022 to rein in inflation, the Governor of the National Bank of Hungary told daily Magyar Nemzet in an interview published on Monday.
Gyorgy Matolcsy said rate hikes must continue until the inflation outlook sustainably declines to around the bank's 3% target again. Headline inflation was running at an annual 7.4% in November.
The bank, which started its tightening cycle in June, raised its base rate by 30 basis points to 2.4% earlier this month, its highest since May 2014, and pledged further rate hikes next year to anchor rising inflation expectations.
The bank has also been raising its one-week deposit rate, which it uses to tackle short-term market volatility, with the latest 20 basis points hike to 3.8% delivered at a tender last Thursday. There is another tender due this week.
Matolcsy said that in the first half of next year, the base rate would catch up with the level of the one-week deposit rate.
"The most effective measure (against inflation) is raising interest rates," Matolcsy said.
When asked about the forint's recent depreciation, Matolcsy said the bank had to use "all the channels of monetary transmission" in order to break rising inflation but global sentiment with respect to emerging markets was working against Hungary now.
Last week, the forint also fell on the government's decision to freeze retail mortgage rates at end-October levels for a six-month period from January to shield households from higher borrowing costs.
Some analysts said this could undermine the bank's efforts to curb inflation.
But Matolcsy said this was not the case.
"The government's move confirms us in our stance that we must act in the most decisive manner in order to break inflation and preserve our financial stability," he said.
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