The European Central Bank tightened its monetary conditions in July

In June 2022, inflation risks continued to rise both globally and in Central and Eastern Europe. This is mainly caused by a sharp rise in energy prices, more expansionary economic policies during the coronavirus crisis, disrupted supply chains and, crucially, the consequences of the increasingly protracted Russo-Ukrainian war.

Aug 24, 2022

The inflation environment caused by the war is forcing central banks to raise interest rates. Hungary has the highest base rate in the region (10.75%), following the central bank’s July rate hikes (200 and 100 basis points).

Against expectations of 25 basis points, the ECB started its rate hike cycle in July with 50 basis points.

In an environment of higher interest rates and higher inflation, there is a trend towards a preference for premium Hungarian government bonds with above-inflation yields over those with fixed yields.

The full report can be downloaded here:

The European Central Bank tightened its monetary conditions in July

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