National Bank of Hungary leaves key rate on hold

Budapest, July 26 (MTI) – The National Bank of Hungary’s Monetary Council decided to leave the central bank’s base rate on hold at 0.90 percent at a policy meeting on Tuesday.

The decision was in line with expectations.

The Council signalled an end to an easing cycle at a policy meeting in May and have since stood by their position on keeping the base rate on hold, while leaving room for the possibility of using unconventional monetary policy tools.

The Council also left the interest rate corridor, a band around the base rate that prevents extreme fluctuations of interbank rates, unchanged. The O/N collateralised loan rate, the top of the range, stands at 1.15 percent, while the O/N central bank deposit rate is -0.05 percent.

In a statement released after the meeting the Council said inflation “remains moderate for an extended period”.

“If the assumptions underlying the [NBH’s] projections hold, the current level of the base rate and maintaining loose monetary conditions for an extended period are consistent with the medium-term achievement of the inflation target and a corresponding degree of support to the economy,” the Council said, echoing a statement made after the previous policy meeting in June.

It added that a “watchful approach” to monetary policy is still justified because of uncertainty in the global financial environment.

The Council noted that a decision announced earlier in July to reduce the frequency of tenders for the NBH’s three-month deposits, its main sterilisation instrument, and limit the amount of bids it accepts “supports further reduction in vulnerability and encourages lending using targeted unconventional tools”.

Source: MTI