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Central bank raises base rate by 50bp

The Monetary Council of the National Bank of Hungary (MNB) raised the base rate by 50 basis points to 6.75% at its rate-setting meeting on Monday.

The rate rise was widely expected, after the Monetary Council said two weeks earlier it planned to gradually increase rates to bring inflation in line with its midterm target of 3% by 2008. The council last raised the base rate by 25bp to 6.25% on June 19.
The forint firmed to 276.70/90 after the announcement at 2 pm. The forint was trading at 278.60/80 to the euro around noon. On the secondary market for government securities, yields rose a further 7-8 bp after increasing 5-7bp in the morning.
Traders said most market movers had expected a 25 bp rate rise at the meeting.