Hungary central bank keeps base rate on hold

Hungarian rate setters on Tuesday kept the base rate at 0.60 percent, while they also left the interest rate corridor unchanged, the National Bank of Hungary said on Tuesday.

In a statement released after the meeting, the council said it had performed a “technical revision” of its quantitative easing programme, pointing out that the stock of government securities on the NBH’s balance sheet had risen by more than 700 billion forints (EUR ) since May 2020.

The council noted that is has proceeded with the programme without setting a total amount and said the next technical revision will be performed when the stock reaches 2,000 billion forints.

The NBH will use the QE programme “to the extent and to the time necessary”, the council said, adding that its implementation will be “continuously monitored”.

The council also decided to add another 1,000 billion forints to the original 1,500 billion forint allocation for the Funding for Growth Scheme Go!, nothing that utilisation of the programme exceeded 1,000 billion forints by mid-November.

FGS Go! “plays a key role in mitigating the adverse economic effects of coronavirus”,

the council said, adding that 15,000 companies have availed of the programme’s cheap credit since its launch in April.

Under the scheme, which is an extension of the Funding for Growth Scheme launched in 2013, the National Bank of Hungary is providing lenders with 0 percent financing for microbusiness and SME loans with fixed rates capped at 2.5 percent. FGS Go! credit is being made available to a broader range of businesses than in the earlier scheme, and programme conditions have been eased.

The council said “monetary conditions established at the short end support price stability, the preservation of financial stability and the recovery of economic growth in a sustainable manner”, reiterating its stand at the previous monthly policy meeting.

The council also repeated that it is “key” to keep short-term yields at a “safe distance from a range close to zero” as well as its commitment to “maintaining price stability during the coronavirus pandemic”.

The council said it closely monitors “the persistence of inflationary effects” resulting from the economic recovery as well as “possible inflationary effects of financial market developments”.

“If warranted by a change in the outlook for inflation, the [NBH] will be ready to use the appropriate instruments,” the policy-makers said.

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Source: MTI