Policy makers keep base rate, O/N deposit rate on hold
Hungarian rate-setters kept the central bank base rate on hold at 0.90 percent and the O/N deposit rate at -0.05 percent at a monthly policy meeting on Tuesday.
The Council has left the rates unchanged since a policy meeting last March; however, they have tweaked monetary policy on a quarterly basis — coinciding with the publication of the central bank’s Inflation Report — by adjusting the amount of liquidity to be crowded out from central bank instruments that pay the base rate.
The central bank will publish its latest Inflation Report on Thursday, but it released the main forecasts from the report on Tuesday.
It lowered the forecast for 2020 inflation to 2.6 percent-2.8 percent from 3.5 percent in the previous Inflation Report released in December.
The central bank explained that the forecast is a range because it is based on two equally weighted scenarios rather than a preferential baseline scenario due to the uncertain economic prospects resulting from the coronavirus pandemic.
The bank sees inflation climbing back to 3.4 percent-3.5 percent in 2021.
Hungary’s CPI was 4.4 percent in February.
The bank put GDP growth this year at 2.0 percent-3.0 percent,
down from 3.7 percent in the previous report. It sees growth snapping back to 4.0 percent-4.8 percent in 2021, lifted by the low base and a rebound.
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“This year’s macroeconomic data are expected to show significant volatility and dichotomy. In the first half of 2020, growth is likely to slow significantly, reflecting the negative economic effects of the pandemic; then domestic growth, the labour market, lending and foreign trade are expected to pick up again as the negative effects wane and lost economic activity is regained,” the central bank said.
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