With the improvement of the global epidemic, economic recovery and rising inflation have accompanied it. Although the Fed and the European Central Bank have not acted for the time being, many countries have already sounded the “clarion call” to tighten policies.
On June 22, local time, in response to rising price pressures during the rapid economic recovery, the Hungarian Central Bank raised the benchmark interest rate by 30 basis points to 0.9%, becoming the first European Union national central bank to raise interest rates after the new crown crisis. The overnight deposit interest rate was unchanged. As expected, it remains unchanged at minus 0.05%.
It should be noted that the rate of this increase is higher than expected. Previously, the market only expected the Hungarian Central Bank to raise interest rates by 25 basis points. The senior officials of the Hungarian Central Bank have warned earlier that a new round of interest rate hikes will begin this month to curb the rise in inflation.
From the perspective of economic data, the Hungarian economy is expected to record double-digit growth in the second quarter, and the annual overall inflation rate in May was 5.1%, which was the same as in April. Both significantly exceeded the central bank’s 2%-4% policy target. Interval.
Zhu Xiaolong, an expert on the Whale Platform think tank and the executive secretary of the Shanghai Jiao Tong University International Financial Leaders Club, told the 21st Century Business Herald reporter, “The Hungarian Central Bank raised interest rates by 0.3% on June 22, a very large rate. The main reason should still come from the United States. Spending a lot of money, the entire flood is rushing all the way with the United States as the center, and it will gradually spread to the world over time, and the flooding effect of currency will gradually appear over time.”
Zhu Xiaolong also said, “Hungary is the first EU country to raise interest rates. As time goes by, more EU countries will follow suit and produce a domino effect.”
As for the key issue of when to tighten the faucet, the current market generally expects that the European Central Bank will tighten policy in the second half of the year, but it will not act earlier than the Fed. Visual China
Experts analyze that raising interest rates will help the Hungarian economy recover as soon as possible
It should be noted that Hungary’s daring to take the lead in raising interest rates is inseparable from sustained economic recovery and progress in vaccination, and these factors are inseparable from the vigorous development of China-Hungary economic and trade exchanges.
In terms of economy and trade, the bilateral trade volume between China and Hungary in the first quarter of this year increased by 64.7% year-on-year; China’s investment in Hungary continued to grow, and Hungary was firmly ranked first among China’s investment destinations in Central and Eastern Europe; the direct freight services between Zhengzhou, Ningbo and Budapest were successfully opened, further promoting both parties Economic and trade exchanges.
In recent years, China-Hungary has achieved fruitful results in economic, trade, cultural and other fields of cooperation, creating a number of “firsts”: Hungary is the first European country to sign the “Belt and Road” cooperation memorandum of understanding with China. Central and Eastern European countries with RMB clearing banks, the first European country to open a bilingual school for Hungarian and Chinese…
Hungarian Minister of Foreign Affairs and Foreign Economic Affairs Sialto said that Hungary’s political stability and low tax rate can provide Chinese investors with the best environment in Europe. Hungary warmly welcomes Chinese investors to invest in Hungary.
In addition, China’s vaccine assistance also allows the Hungarian economy to recover with confidence. Hungary is the first EU member to recognize and use China’s new crown vaccine. Hungarian President Adair and Prime Minister Orban received the China National Pharmaceutical Group Covid-19 vaccine in February this year.
Sialto said, “Thanks to China for delivering multiple batches of vaccines to Hungary in time and even in advance, which protects the lives of 1 million Hungarian people. We will never forget about this.” Since March last year, Hungary has purchased from China. Many protective and medical equipment. Last year, the two countries also established an “air bridge” between Budapest and Beijing to transport epidemic prevention materials.
Shen Meng, an expert at Whale Platform think tank and executive director of Chanson Capital, told a reporter from 21st Century Business Herald that “Hungary’s country and economy are relatively small, and inflation under long-term low interest rates lacks sufficient market depth, which can easily lead to social instability. This time, we are the first to start raising interest rates, and strive to compete for capital inflows and resume growth as soon as possible when the global economy is down.”
Norway plans to raise interest rates in September
The general background of the interest rate hike in Hungary is that with the restart of the US economy and the rapid rebound in prices, Fed officials have begun to discuss ending the bond purchase plan, and last week advanced the expectation of the first interest rate hike after the epidemic.
The economic boom in the United States is also pushing up global inflation, and many central banks have been forced to raise interest rates. The Central Bank of Russia has raised interest rates three times this year, raising the benchmark interest rate to 5.5%, and Governor Nabi Urina said that Russia will continue to raise interest rates. The Central Bank of Brazil announced earlier that it would raise interest rates by 0.75 percentage points for the third time in a row, and hinted that there may be more substantial interest rate hikes in the future to combat inflation of more than 8%. The Central Bank of Turkey sharply raised its key interest rate to 19% in March to combat double-digit inflation and the continued depreciation of the lira.
In addition to Russia, Brazil, Turkey, Hungary and other countries raising interest rates in response to inflation, the Norges Bank also said last week that it will raise interest rates in September, and it is expected that central banks in the Czech Republic and other countries will also raise interest rates soon.
In stark contrast to this, the European Central Bank still has a loud voice and continues to be bearish on inflation risks. European Central Bank President Lagarde refused to compare the United States with the Eurozone, saying that the U.S. economy is recovering much faster than the Eurozone. “The situation in the United States and Europe are obviously different, and it is easy to compare them, but considering the many differences between the two economies, this is not very wise.
Lagarde said that the acceleration of inflation in the United States will only have a limited impact on the euro zone. Although rising inflation in the United States will bring about some “spillover effects”, including rising import prices, stronger exports, and even Eurozone people’s expectations for inflation may also rise. “But overall, the impact on the Eurozone Harmonized Consumer Price Index (HICP) is expected to be moderate.”
But Zhu Xiaolong, executive secretary of the International Financial Leaders Club of Shanghai Jiaotong University, believes that this is nothing more than Lagarde calming the market. “Personally, I feel that the facts may not be as Lagarde said. The impact of the United States on European inflation will gradually become apparent.”
As for the key issue of when to tighten the faucet, the current market generally expects that the European Central Bank will tighten policy in the second half of the year, but it will not act earlier than the Fed. Goldman Sachs predicts that the European Union may decide to tighten its bond purchase plan in September, and it may no longer rely on the fiscal austerity policies implemented in the past. As for the Federal Reserve, analysts predict that hints to curtail bond purchases may be issued in August or September and will be officially announced later this year.
Reprint indicated source：Spark Global Limited information