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Central banker envisions further hikes to forint base rate

Hungary's central bank may be forced to raise interest rates due to risks to its inflation target, deputy governor Ferenc Karvalits told Reuters.

“Recent developments in commodity prices might exert further pressure on domestic inflation. We cannot rule out that we will need further (monetary) tightening,” he told Reuters.

“However, everybody should keep in mind that substantial tightening has happened already and its impacts unfold with a time lag,” he said, referring to three rate hikes totaling 100 basis points in the past three months which have brought the key base rate to 8.5%.

Karvalits was speaking after May twelve-month inflation, published on Wednesday morning, came to 7.0%, rising from 6.6% in April, up from analysts' expectation for no change or a minimal rise. Karvalits said that the figure slightly exceeded not the bank's expectations too.

The National Bank of Hungary (MNB) will hold its next rate-setting meeting on June 23. (MTI – Econews)