In Hungary, monetary policy is acting ever more hectically against the collapse of the national currency and inflation.

On Tuesday, the central bank (Magyar Nemzeti Bank MNB) raised interest rates by 200 basis points to 9.75 percent.

The other sentences were also raised to the same extent.

This puts Hungary at the top of the post-communist economy in the region in terms of risk premiums.

It is an unconventional bang by the monetary watchdogs.

After all, the currency council of the central bank holds a weekly meeting, but usually only sets the current key interest rate once a month.

Michael Seiser

Business correspondent for Austria and Hungary based in Vienna.

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Market participants reacted, at least in the short term, after the forint has been falling from one low to the next for months: the exchange rate strengthened against the euro to below 410 in the afternoon after having been trading at 415 in the morning.

Should the forint not stabilize, however, double-digit interest rates will soon return in line with double-digit inflation.

Analysts now expect the top rate hike to be 13 percent – ​​three months ago, the MNB saw a maximum of 7 percent.

The reason for the currency weakness is, on the one hand, the uncertainty about the flow of EU funds for the country.

These are up for grabs because Hungary is threatened with cuts in billions in payments from the EU budget following a ruling by the European Court of Justice on the so-called rule of law mechanism.

Hungary is one of the largest net recipients in the Community.

On the other hand, there is pressure in the national budget.

Finally, the national conservative government capped energy prices for consumers.

Therefore, the state has to pay the difference for the actual price from public funds.

According to forecasts, the small Central European country is likely to achieve new debt of six percent of economic output this year and thus one of the highest deficits in the EU.

In addition, the cabinet was clear about the negative effects on inflation and the balance of payments, after the usual references to Russia's war of aggression in neighboring Ukraine no longer applied as an explanation for the currency collapse.

At the same time, the minister referred to the country's weak points (dependence on energy and relatively high national debt), which are also very well known.

They are working on a diversified energy supply and on an agreement with the Commission.

At the same time, Chancellery Minister Gergely Gulyás emphasized that the state's financing would be secured even without funds from Brussels.