Hungary’s interest rate proposal, last CBRT rate hike

The proposal by the Hungarian government this week to change the reference rate used to price bank loans has sparked a lot of criticism and risks undermining the central bank’s independence. We think it would present a further upside threat to the medium-term inflation outlook. In contrast, hawkish guidance from Turkey’s central bank as it ended its tightening cycle this week provided us with further confidence in its shift to orthodox policymaking.