The National Bank of Hungary (MNB) raised the base rate, which is equal to the key two-week depo rate, by 300 basis points from 9.5% to 12.5% on Friday morning. The base rate has not been this high since the introduction of inflation targeting in June 2001. A loss of confidence by investors had triggered the drop in the forint's exchange rate, which made the interest rate hike necessary. A minor crisis of confidence has been building for several months because of substantial budget and current account deficits, a slowdown in foreign direct investment (FDI) inflows, and the low level of savings.
