National Bank of Hungary policy makers keep base rate on hold

The National Bank of Hungary’s Monetary Council decided to keep the central bank’s key rate on hold at 0.9 percent at a monthly policy meeting on Tuesday.

The Council has left the base rate on hold since signalling an end to an easing cycle at a policy meeting in the spring of 2016. However, the rate-setters have made use of “unconventional, targeted” instruments to ease monetary policy further.

The Council also left the overnight central bank deposit rate at -0.15 percent and the overnight collateralised loan rate at 0.90 percent at the meeting on Tuesday.

In a statement released after the meeting, the Council suggested an adjustment to the timeframe for maintaining its loose policy compared to earlier communications.

“In the Council’s assessment, maintaining the base rate and the loose monetary conditions is still necessary to achieve the inflation target in a sustainable manner,” the statement said.

Noticeably absent from the communication were phrases on maintaining those conditions “at both the short and long ends” of the yield curve and “for an extended period” as the Council had said in statements after policy meetings in previous months.

“The Council will ensure the maintenance of loose monetary conditions, necessary to achieve the inflation target in a sustainable manner, by using the current set of monetary policy instruments,” according to the statement released after the meeting on Tuesday.

Commenting on the most recently introduced of the set of policy instruments, the Council said the NBH would continue mortgage bond purchases and its monetary policy rate swap (MIRS) facility as programmes, calling them “an integral part” of the set of monetary policy instruments.

However, unlike in statements issued after previous monthly policy meetings, the Council did not say these programmes would operate “continuously and for a prolonged period”.

Source: MTI