Inflation in July exceeded 4%! The Central Bank of Hungary became the first central bank to pause interest rate cuts due to sudden acceleration in inflation
According to Bank of America's previous calculations, 2024 is already the third highest year on record for global interest rate cuts, only behind 2009 and 2020. However, many people may not realize that inflation remains at an unbearable level for most individuals
Against the backdrop of major central banks around the world embarking on interest rate cuts to stimulate economic growth, the Hungarian central bank unexpectedly paused its rate-cutting cycle due to accelerated domestic inflation.
In July, Hungary's inflation rate exceeded 4%, surpassing the upper limit of the central bank's tolerance range. This change forced the National Bank of Hungary to press the pause button after 15 consecutive rate cuts to prevent inflation from spiraling out of control.
On Tuesday, the Hungarian central bank announced that it would maintain the benchmark interest rate at 6.75%, a decision in line with the majority of analysts' predictions.
The Hungarian central bank stated that it is looking for opportunities to further ease monetary policy. However, some analysts believe that with the resurgence of inflation, Hungary's loose policy seems to have reached its limit, similar to the United States in the 1970s, signaling another more painful tightening cycle on the horizon.
The Monetary Council of the Hungarian central bank said in a statement:
In the coming period, there may still be room for further cautious rate cuts, depending on the expected interest rate policies of major central banks globally, as well as the development of domestic inflation prospects and changes in Hungary's risk perception.
Following the decision, the Hungarian official currency, the forint, strengthened slightly, but it has still fallen by 2.4% against the euro since the beginning of this year.
It is worth noting that apart from the Federal Reserve, most other G7 central banks (including the European Central Bank, the Bank of England, the Bank of Canada, the Swiss National Bank, etc.) have already cut interest rates at least once.
According to calculations by Bank of America, 2024 is already the third-highest year on record for global interest rate cuts, following only 2009 and 2020. However, many may not realize that inflation remains at intolerable levels for most people.