Hungary: Central Bank leaves rates unchanged
May 23, 2017
At its 23 May monetary policy meeting, the Monetary Council of the Hungarian National Bank (MNB) left the base rate unchanged at its current record low of 0.90%, in line with market expectations. All other monetary policy instruments were also kept unchanged. The one-week collateralized lending rate for banks and the overnight collateralized lending rate both stood at 0.90% while the overnight deposit rate remained put at minus 0.05%. The upper limit on the stock of three-month central bank deposits, which emerged as an integral monetary policy instrument, remains at HUF 500 billion. However, the Bank indicated that this could be changed in the future.
Given benign inflation and the Council’s optimistic growth outlook, the decision to maintain the current policy stance comes as no surprise. Inflation is expected to reach the Bank’s target in the first half of 2018 owing to loose monetary policy, wage growth and solid economic activity. The Monetary Council sees stable annual growth of between 3-4% over the coming years.
The Bank provided clear forward guidance. Monetary conditions are set to remain accommodative going forward since they are “consistent with the medium-term achievement of the inflation target and a corresponding degree of support to the economy.” If inflation remains “persistently below” the current target of 3.0% however, the Council reaffirmed their commitment to lower rates even further.
The next monetary policy meeting will be held on 20 June.