National Bank of Hungary keeps base rate on hold – UPDATE

The National Bank of Hungary‘s Monetary Council decided to keep the central bank’s key rate on hold at 0.90 percent at a meeting on Tuesday, as expected.

The council has left the base rate on hold since signalling an end to an easing cycle at a policy meeting at the end of May 2016. However, the rate-setters have made use of “unconventional, targeted” instruments to ease monetary policy further, such as placing a limit on the central bank’s main instrument for sterilising liquidity, introducing EUR/HUF swaps to provide forint liquidity as well as modifying the interest rate corridor, a band around the base rate that prevents extreme fluctuations of interbank rates.

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.