Hungarian rate-setters keep the base rate on hold

Photo: Daily News Hungary - Alpár Kató

Hungarian rate-setters kept the base rate on hold at 0.60 percent at a regular meeting on Tuesday.

The Monetary Council also left the interest rate corridor unchanged, the National Bank of Hungary (NHH) said.

In a statement released after the meeting the Council said the 0.60 percent base rate “supports price stability, the preservation of financial stability and the recovery of economic growth in a sustainable manner”.

“The Council remains committed to maintaining price stability during the coronavirus pandemic and pays particular attention to the persistence of inflationary effects arising as a result of the economic recovery,” the rate-setters said.

“If warranted by a persistent change in the outlook for inflation, the Council will be ready to use the appropriate instruments,” they added.

The Council said it decided to raise the allocation for the NBH’s Bond Funding for Growth Scheme (BGS) from 450 billion forints to 750 billion forints (EUR 2.07bn).

“The increased amount may help the Hungarian corporate bond market continue to converge to European and regional averages,” the policy makers said.

The NBH launched the BGS more than a year ago to give impetus to Hungary’s relatively small corporate bond market.

The Council noted they had decided at the previous policy meeting to raise weekly purchases of government bonds in the framework of a quantitative easing programme to 40 billion forints.

They said on Tuesday the programme will be used “through a lasting market presence to the extent required”, adding that

the NBH will continue to purchase securities with long maturities.

Commenting on the bank’s decision, opposition Párbeszéd MP Sándor Burány said the NBH had made it clear that it was “either incapable of saving the forint and curbing inflation or doesn’t want to”.

Burány said the government and the central bank had “put the forint in increasingly greater danger” over the past ten years, adding that the currency today was “on life support”.

This, he said, had resulted in the forint weakening to record levels and inflation reaching record highs. In the recent period, Hungary registered the European Union’s highest inflation rate and the rate calculated using a basket of goods and services used by pensioners has exceeded 4 percent, the lawmaker said, repeating his party’s call for the introduction of a universal basic income.