Hungary Monetary Policy


Central Bank introduces new domestic loan facility

At its 27 March monetary policy meeting, the Central Bank voted to leave the base rate unchanged at 7.00%, which was expected by most market analysts. Moreover, the Bank announced the introduction of a new two-year collateralised loan facility for domestic lenders at the Bank's base rate, which was offered for the first time on 3 April, in an attempt to boost liquidity in the financial system. The Bank expects growth to stagnate this year before picking up next year. Meanwhile, on the inflation side, monetary authorities anticipate inflation to rise significantly, reflecting the effects of increases in VAT and excise duties as well as the rise in oil prices and the depreciation of the forint exchange rate in the second half of 2011. Finally, the Bank highlighted the importance of a deal between the government and the IMF/EU to be reached as soon as possible, in order to reduce the risks associated with financing the government debt.


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