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 0.90 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. After recent policy meetings, the Council has said it is “prepared for the gradual and cautious normalisation of monetary policy”.

In a statement released after the meeting, the Council reiterated its earlier stand and offered little new information on the possible timing of a policy shift.

“The Monetary Council is prepared for the gradual and cautious normalisation of monetary policy, which will begin depending on persistent inflationary developments,” the rate-setters said.

“Core inflation excluding indirect tax effects is likely to continue to rise in the coming quarters, which the Council will assess in terms of the sustainable achievement of the inflation target,” the Council added.

The NBH releases its measure of core inflation excluding indirect tax effects — a gauge that captures “persistent inflationary trends” — every month, shortly after the Central Statistical Office (KSH) releases headline and core inflation data.

In January, the indicator rose to 3.0 percent, reaching the mark for the first time since February 2012.

In its statement on Tuesday, the Council acknowledged the indicator had reached the 3.0 percent threshold and said it is “likely to rise above 3 percent in the coming months” but “then stay close to 3 percent over the monetary policy horizon”.