Hungary policymakers keep base rate on hold

The Monetary Council of the National Bank of Hungary (NBH) decided to leave the central bank base rate unchanged at 0.60 percent at a monthly policy meeting on Tuesday.

The Council also decided on Tuesday to leave the O/N deposit rate at -0.05 percent and the O/N and one-week collateralised loan rates at 1.85 percent.

In a statement released after the meeting, the Council said inflation is “likely to be highly volatile” in the coming months, spiking due to base effects, rising fuel prices, further increases in excise duties and demand-supply frictions as the economy restarts.

The Council said the NBH remains “committed to maintaining price stability even during the third wave of the coronavirus pandemic”, adding that it is the central bank’s “clear intention to prevent the current uncertain environment from causing a sustained rise in inflation”.

It said the “greatest risk” in terms of the outlook for inflation is posed by “the increase in risk aversion vis-a-vis emerging markets and potential second-round effects following the restart of the economy”.

At a press conference after the meeting, NBH governor György Matolcsy said there would be “temporary upsurges” in inflation in 2021, but added that these would be the consequence of one-off and external factors.