Hungarian policy makers keep base rate, O/N deposit rate on hold

The Monetary Council of the National Bank of Hungary (NBH) decided to keep the central bank’s base rate at 0.90 percent and the O/N deposit rate at -0.05 percent at a monthly policy meeting on Tuesday.

The decision was in line with expectations.

In a statement released after the meeting, the council again noted the upside risk to inflation of strong domestic demand, contrasted with the downside risk of weakening external activity, but said “downside risks have strengthened” with regard to persistent inflation trends.

“Lower-than-expected underlying inflation data for recent months and the ongoing deterioration in external activity indicate strengthening in downside risks to the longer-term inflation outlook,” the council said.

It noted that the NBH’s measure of core inflation excluding indirect tax effects, a bellwether indicator of underlying inflation, had fallen to 3.2 percent in July, while inflation of industrial goods as well as services had slowed.

“Persistent inflation developments were overall lower even than expected,”