Tuesday, 16 August, 2022

Hungary hikes interest rates to stem rampant inflation

BUDAPEST: Hungary's central bank announced Tuesday its latest large interest rate hike as the country faces soaring inflation and a plunging local currency amid talks with Brussels over held-up EU funding.

The two percentage point hike to 9.75 percent is a level not seen since late 2008, during the global financial crisis, reports AFP.

Tuesday's hike follows a 1.85 percentage point increase last month and was justified "in order to anchor inflation expectations," the bank said in a statement after the announcement.

Hungarian inflation has hit double figures in recent months for the first time in 20 years, despite a range of price caps fixed by Prime Minister Viktor Orban.

Central banks around the world have launched a series of rate increases as Russia's war in Ukraine has fuelled a surge in energy and food prices that has driven up inflation.

Hungary's central bank raised borrowing costs last year for the first time in a decade to fight inflation.

Analysts said Tuesday's move was also aimed to steady the local currency, the forint, which has been plunging against the euro for weeks due to uncertainties over the holding-up of European Union funds to Hungary.

Orban's government is in long-running talks with Brussels over the release of bloc funding that has been frozen by concerns about corruption and rule-of-law in Hungary.

In a separate development, hundreds of protesters on Tuesday blocked traffic in downtown Budapest in a rally against the government scrapping a preferential tax for small business owners.