The building of the NBH in Budapest – Photo: wikimedia

Hungary central bank among first to warn of inflation

Hungary's central bank was among the first to warn of sustained global inflationary pressures, and it was the first in the European Union to kick off a cycle of rate hikes, Csaba Kandracs, the deputy governor of the National Bank of Hungary, said in an interview published by business news portal, adding that November's inflation rate of 7.4 percent had been expected.

“We must be prepared to fight persistent inflation. Timing, consistency and determination will be key to success. We will continue to do whatever is necessary,” Kandracs said.

He said Hungary’s financial stability was strong in the current crisis period, and banks, insurance companies and funds were well positioned to weather the storm.

The deputy governor said inflation in Hungary was likely to return to the bank’s tolerance band of below 4 percent by the end of 2022, though core inflation may take longer to start declining substantially, likely from the second half of next year.

Further interest rate hikes are therefore required, he said.

Kandracs said the moratorium on loan repayments amounted to around 4 percent of the total loan portfolio, or 672 billion forints, and the banking system was well buffered in this respect.

He said the economy was performing well, the labour market was tight and wages were rising, while the level of reserves was adequate. There was no reason to maintain the ban on bank dividend payments, he said, adding that the payment of dividends may start from January.

Leave a Reply