European Markets

Hungary central bank raises one-week deposit rate by 40 bps to 2.9% at weekly tender

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BUDAPEST, Nov 25 (Reuters) - Hungary's central bank raised its one-week deposit rate by 40 basis points to 2.9% on Thursday at its weekly tender, delivering the second increase in the depo rate in a week as it continues tightening policy to curb rising inflation risks.

Last week, the bank raised the rate on the one-week deposit facility by 70 basis points to 2.5% at the tender , where it normally announces the rate at 1050 GMT. The bank unexpectedly brought forward the announcement on Thursday.

Earlier this month, the National Bank of Hungary raised its main base rate by 30 basis points to 2.1% in a bid to curb inflation, and it said it was ready to raise the rate on one-week deposits above the base rate, which traders and analysts said could support the forint.

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The bank has pledged to continue its monetary tightening as long as necessary and flagged a "more extensive and longer lasting" tightening to curb rising inflation risks and anchor inflationary expectations.

"The one-week depo rate will exceed the level of the base rate as long as the commodity and financial market risks relevant to the inflation outlook prevail," a bank statement said, adding there was no time limit for this decision.

Traders and analysts said the deposit rate hike could support the forint, which hit new lows versus the euro earlier this week amid worries over the economic impacts of a new wave of COVID-19 cases and a strong dollar.

The forint firmed to 366.75 from around 367.10 to the euro immediately after the rate hike on Thursday, but had given back those gains to trade at 367.50 at 0856 GMT.

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Reporting by Krisztina Than Editing by Mark Potter

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