NBH scores an own goal by interest hike

Forint dropped to a new all-time low of 276.5 against the euro yesterday after the National Bank of Hungary (NBH) raised interest rates by 25 basis points to 6.25 percent. Even some minutes before the decision, markets expected either an increase by 50 basis points or no increase at all. An official briefing claimed that the monetary council did not focus on exchange rates when taking its decision. Rather, it tried to make sure that yield margins reflect expected premiums. But analysts considered that this hike just increased uncertainty in the market. VGO