The Hungarian government extended a cap on large commercial bank deposits on Wednesday until the end of Q2 and introduced restrictions on central bank discount bill transfers.
After the National Bank of Hungary unveiled a quick deposit facility NBHK3 with an 18% interest rate in October to limit falls in the Forint, the government announced the cap on large commercial bank deposits.
Due to expire at the end of this month, the measure states Hungary's commercial banks cannot pay an interest rate higher than the three-month discount bill yield on deposits by several large institutional and private investors, Reuters reports.
"To further prevent unjust enrichment, the government has extended this deadline until June 30, 2023, and to protect the economy, it has also banned the unrestricted transfer of central bank discount bills," said the Economic Development Ministry.
"The measure will prevent unjust enrichment at the deposit tenders as well as through the central bank's new discount bill facility," the ministry went on to add, saying the modification would also boost the functioning of the government bond market.
The central bank kept all key interest rates the same in February, resisting pressure from the government to lower borrowing costs, and offered 1 trillion Forints worth of short-term discount bills earlier this week within moves to bolster monetary transmission.
Back in February, the National Bank of Hungary announced it needed to retain its 18% one-day deposit rate to curtail inflation, going on to say that altering the base rate was not in the pipeline as the central bank focused on risk assessment improvements in the long-term, the Reuters report adds.
As it stands, the European Commission forecasts Hungarian inflation at 16.4% this year, the highest in the European Union. The central bank is scheduled to hold its monthly policy meeting on Tuesday.
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