Hungary’s central bank leaves base rate on hold

The Monetary Council of the National Bank of Hungary left the base rate unchanged at 0.90 percent and the central bank O/N deposit rate at -0.05 percent at a regular meeting on Tuesday.

The Council also decided to leave the central bank’s O/N and one-week collateralised loan rates unchanged at 1.85 percent.

The O/N deposit rate and the collateralised loan rate mark the bottom and the top, respectively, of the central bank’s “interest rate corridor”.

The base rate is paid on mandatory reserves.

At a meeting three weeks earlier, the central bank’s policy makers unveiled a package of measures to mitigate the impact of the coronavirus pandemic on the economy and establish the conditions for a jump-start. The measures included 1,500 billion forints (EUR 422.2m) in financing for cheap loans for businesses and a programme to buy government securities on the secondary market.

On Tuesday, the National Bank of Hungary said

its government securities purchases will take place on the secondary market at regular weekly auctions and in transactions outside of the auctions.

To prevent the NBH from becoming a dominant market player, the amount it may purchase of any securities series will be capped at 33 percent of outstanding stock, in line with European Central Bank practices.