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BUDAPEST, July 22 (Reuters) – The National Bank of Hungary (NBH) will continue its cycle of rate rises until inflation returns near its 3% policy target, Deputy Governor Barnabas Virag told financial news website portfolio.hu in an interview published on Thursday.

Last month, the central bank raised its base rate by 30 basis points to 0.9%, becoming the first in the European Union to launch a cycle of rate rises to rein in price pressures amid a swifter than expected recovery from the COVID-19 pandemic.

The NBH is likely to extend the cycle of hikes with an increase of 20 basis points in its base rate to 1.1% next Tuesday after inflation proved higher than expected, a Reuters poll of analysts showed.

“This cycle will continue in monthly steps and this will have clear effects on inflation from the beginning of 2022,” Virag was quoted as saying.

“As a result of our proactive monetary policy, the pace of price growth will return not just within the (2% to 4%) target range, but fall near the (3%) central bank target next year,” Virag added.

The bank would continue its rate rise cycle until it reached that target, he added.

Earlier Virag said Tuesday’s meeting would be crucial regarding the size of future rises as the bank looks to rein in price surges.

On Thursday, however, he did not comment on the possible size of next week’s move.

The NBH projects average inflation at 4.1% this year, above the top end of a target range of 2% to 4%, returning to its 3% policy anchor sometime around mid-2022, thanks to policy tightening.

However, the poll sees average inflation even higher, at 4.4% this year, though easing next year to 3.4% and in 2023, to stand at 3.2%. (Reporting by Gergely Szakacs; Editing by Clarence Fernandez)

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