Hungary said it would continue a cycle of interest rate hikes and shut down its quantitative-easing programs, removing brakes on one of the most aggressive monetary tightening campaigns in Europe.
The forint extended gains against euro after the central bank said it has ended its programs for buying corporate and government bonds following a meeting. Deputy Governor Barnabas Virag said the tightening campaign would be “long” and extend into 2022.
Earlier, policy makers raised the required reserve rate by 30 basis points to 2.4%, less than the 40 basis points that was the median estimate in a Bloomberg survey. It also increased the low-end of the interest-rate corridor by 80 basis points to 2.4% and the high-end by 30 basis points to 4.4%, reinforcing the upward
trajectory of interest rates.
The central bank pledged to follow increases in the reserve rate, the nominal base rate which is set monthly, with hikes in the one-week deposit facility. The latter has become the effective base rate after a cumulative 150 basis points in hikes to 3.3% over the past month.