Hungarian central bank policy makers keep base rate on hold but take ‘unconventional’ easing measures

The National Bank of Hungary’s Monetary Council decided to keep the central bank’s key rate on hold at 0.90 percent at a meeting on Tuesday, but took a number of other measures to ease monetary conditions in light of lower than expected inflation.

The council lowered the O/N central bank deposit rate from -0.05 percent to -0.15 percent, reduced the cap on three-month deposits, its main instrument for sterilising liquidity, to 75 billion forints, and decided to raise the stock of swap instruments. The council left the O/N collateralised loan rate, the top end of the interest rate corridor, a band around the base rate that prevents extreme fluctuations of interbank rates, unchanged at 0.90 percent.

The council has left the base rate on hold since signalling an end to an easing cycle at a policy meeting in the spring of 2016.

However, the rate-setters have made use of such “unconventional, targeted” instruments to ease monetary policy further.