Rate-setters ditch baseline inflation scenario

"Members unanimously argued that the effects of the global increase in energy prices were being felt in an increasingly wide range of consumer prices. They agreed that the path of inflation had shifted to the risk scenario assuming a persistently elevated external inflation environment, published in the September Inflation Report," according to the minutes of the meeting released on Wednesday.

"Members were of the view that due to cost shocks experienced in recent weeks, inflation would remain elevated over a longer period, and therefore the sustainable achievement of the inflation target may be delayed compared to the September Inflation Report's projection. In view of this, a longer series of monetary policy steps might have to be taken than previously planned," the minutes show.

Several council members noted that inflation was climbing on the back of higher prices for "a wide range of products and services", and members stressed that some energy prices had tripled since the beginning of the summer as commodity prices rose.

"The Monetary Council concluded that risks to the inflation outlook remained clearly on the upside and might persist longer than earlier expected," the minutes show.

The council voted unanimously to raise the central bank base rate by 15 bp to 1.8% at the meeting on October 19. Deputy governor Mihály Patai was absent from the meeting.

The rate-setters continued a tightening cycle started in June, albeit at a slower pace than in the summer months when rates rose 30 bp each month. Policymakers had signaled in September that the 15 bp increase that month would be indicative of hikes in the following months.