Hungarian central bank holds rates as majority cites geopolitical and market risks

Mihály Patai, a deputy governor of the National Bank of Hungary (NBH), was the only member of the central bank’s Monetary Council to vote for a rate cut at a monthly policy meeting in November, the minutes of the meeting released on Wednesday show.

Eight of the Council’s nine members voted to keep the base rate on hold at 6.50pc at the meeting on November 19. Patai voted for a 25bp cut.

“Decision makers underlined that geopolitical tensions, volatile financial market developments and the risks to the outlook for inflation warranted a further pause in cutting interest rates,” according to the minutes.

Members stressed that sentiment on international financial markets had been volatile since the October policy meeting, and risk aversion towards emerging markets had increased in parallel with the appreciation of the dollar.

Members were in agreement that financial market stability remained “a key factor” in terms of price stability.

Discussing domestic inflation developments, the Council concluded that the consumer price index had risen slightly but remained below expectations in October, reflecting declining price growth in market services.

Based on real economic developments, the inflation outlook and the assessment of the risk environment, members concluded that subdued economic growth in Hungary was largely fueled by such factors as weak agricultural performance or subdued external activity which fell outside the scope of monetary policy.

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