Central bank keeps base rate on hold at 1.35 pc, as expected

Budapest, November 17 (MTI) – Hungarian rate-setters on Tuesday kept the central bank’s key rate on hold at 1.35 percent.

The decision was widely expected after the Monetary Council clearly signalled an end to an easing cycle at their monthly policy meeting in July. Central bank governor Gyorgy Matolcsy said at the time that the earlier series of 15 basis point cuts carried out for five consecutive months would soon come to an end.

In a statement released after the meeting, the Council reiterated that the base rate could remain at its record low level “for an extended period over the entire forecast horizon” in order to attain the medium-term inflation target while supporting the economy, the Council said.

Inflationary pressures are “likely to remain moderate” and the negative output gap — the difference between the economy’s actual output and its full capacity potential — is “expected to close only gradually” over the policy horizon, the members said. A “cautious” approach to monetary policy is still warranted due to uncertainty in the global financial environment, it added.