Loose monetary conditions to be introduced in 2018
The National Bank of Hungary’s (NBH) Monetary Council has decided to introduce two non-conventional monetary policy tools in January 2018, the Council said in a statement published on the central bank’s website after Tuesday’s rate-setting meeting.
One of the two tools will be an unconditional 5-year and 10-year interest rate swap (IRS) instrument, with a limit amount of 300 billion forints for the first quarter of 2018.
The IRS instrument will be accessible to partner banks through tenders held regularly from January 1, 2018.
Furthermore, the NBH will also launch a targeted programme to purchase 3-year or longer-term mortgage bonds, the Monetary Council said in the statement.
The NBH will make a decision on the operational details of the programmes in December 2017.
The NBH will introduce the tools because the curve for long-term yields in the government securities and interbank markets was still steep in international comparison,
even though the difference between short and long-term yields has narrowed recently.
The Council considers it important that the loose monetary conditions have their effect also at the longer end of the yield curve. The Council said the two unconventional instruments will constitute an integral part of its set of monetary policy instruments.