Budapest, January 24 (MTI) – Hungarian rate setters kept the base rate unchanged at 0.90 percent at a policy meeting on Tuesday.
The decision was in line with the expectations of analysts. London analysts expect the rate to remain unchanged until mid-2018.
The central bank’s Monetary Council signalled an end to an easing cycle last May and has since stood by its position on keeping the base rate on hold, while leaving room for the possibility of using unconventional monetary policy tools.
At the meeting on Tuesday, the council left the interest rate corridor unchanged, with the O/N collateralised loan rate at 0.90 percent and the O/N central bank deposit rate at -0.05 percent.
In a statement released shortly after the meeting, the council repeated its earlier stand on keeping the base rate on hold “for an extended period”, while staying prepared to ease monetary conditions with unconventional instruments.
“If the assumptions underlying the [NBH’s] projections hold, maintaining the current level of the base rate for an extended period and the loosening of monetary conditions by the change in the monetary policy instruments are consistent with the medium-term achievement of the inflation target and a corresponding degree of support to the economy….If subsequently warranted by the achievement of the inflation target, the Council will stand ready to ease monetary conditions further using unconventional, targeted instruments,” the statement said.
The council noted that inflation is “rising gradually to the target” and that the disinflationary impact of the real economy is “gradually dissipating” over the policy horizon.
Most analysts polled by MTI said they did not expect the base rate to change until mid-to-late 2018.
Gergely Suppán of Takarékbank said he did not expect the NBH to raise the base rate until mid-2018. He reckoned that the bank could make an early projection of reaching its inflation target of 3 percent for the year in its March inflation report, adding that there was no need for adjustments as long as inflation is expected to fall within the 2-4 percent range.
Erste Bank chief analyst Gergely Urmossy said the central bank could ease monetary conditions further, as interbank rates could fall further. Urmossy said he expected the three-month Budapest interbank (BUBOR) rate to fall below the current 0.27 percent, adding that the fall in nominal interest rates could lead to a rise in inflation. Urmossy projected an average inflation rate of 2.3 percent for 2017.
CIB Bank analyst Sándor Jobbágy said he expected the central bank to leave the key rate unchanged until the end of the year. The use of further unconventional monetary policy tools is possible, he said, adding, at the same time that the bank had less room for maneouvre in this area. Jobbágy said the bank was unlikely to introduce any new credit programmes.