Hungary Monetary Policy February 2018


Hungary: Central Bank keeps interest rates on hold in February

January 30, 2018

At its latest monthly monetary policy meeting held on 27 February, the Monetary Council of the Hungarian National Bank (MNB) decided to hold the base rate unchanged at its current record low of 0.90%, while also maintaining all the other monetary policy instruments unchanged. Accordingly, the one-week collateralized lending rate for banks and the overnight collateralized lending rate both remained at 0.90%, and the overnight deposit rate stayed at minus 0.15%. The announcement was in line with market expectations.

February’s monetary decision was expected, as inflation remains. The latest estimates from the Bank foresee inflation reaching its target of 3.0% plus or minus 1.0 percentage point by the middle of 2019 under current monetary conditions. Additionally, the accommodative stance is helping the MNB fulfill its mandate of supporting economic growth and financial stability in the country. The MNB mentioned that current rates were appropriate, as volatility rocked global financial and equity markets since the previous meeting on 30 January.

The Bank’s forward guidance remained unchanged this month, reaffirming that conditions will remain accommodative in the medium-term. The MNB considers that its current stance is appropriate for inflation to reach the target level by mid-2019. Finally, the Bank made no mention of additional monetary easing in upcoming meetings. A rate hike is therefore very unlikely until the inflation goal is reached.

The next monetary policy meeting will be held on 27 March.

FocusEconomics Consensus Forecast panelists see the base rate ending 2018 at 0.90%. For 2019, the panel sees the base rate ending the year at 1.07%.

Author: Jean-Philippe Pourcelot, Economist

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Hungary Monetary Policy Chart

Hungary Monetary Policy January 2018

Note: Central Bank base rate in %.
Source: Hungarian National Bank (MNB).

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