A second interest rate hike since June is on the cards in Hungary to attempt to tackle the fastest inflation in the European Union.

Hungary tightened monetary policy last month as consumer prices were driven higher following a rally in global commodities and lockdown restrictions being relaxed.

Monthly rate increases have been mooted by the central bank to bring inflation back to the 3% target from the current rate of over 5%.

The majority of analysts polled by Bloomberg forecast the base rate – presently at 0.9% - will rise by 15 basis points.

“Price growth will slow to not only within the tolerance band but to near the central bank’s goal next year as a result of proactive monetary policy,” according to the bank’s Deputy Governor Barnabas Virag last week. “We’re going to continue the cycle until we reach this.”

Hungary is going against the argument from the world’s largest central banks that the current inflation bout is only temporary, fuelled by base effects and supply-chain issues.

In addition, Hungary’s currency is a factor for the high inflation. The Hungarian forint plummeted to an all-time low in March, and since the beginning of last month has been the region’s worst performing currency against the euro.

Furthermore, more aggressive interest rate hikes are predicted over the next few months by money-market investors. The three-month Budapest interbank rate – which is a broadly-used indicator for the economy’s prevailing interest rate – is 17 basis points over the central bank’s benchmark. Forward-rate agreements show close to 60 basis points of increases by October.