Hungary Monetary Policy November 2018


Hungary: Central Bank keeps rates unchanged in November

November 20, 2018

At its latest monetary policy meeting held on 20 November, the Monetary Council of the Hungarian National Bank (MNB) left the base rate unchanged at its current record low of 0.90%, while also holding steady all other monetary policy instruments. Accordingly, the one-week collateralized lending rate for banks and the overnight collateralized lending rate both remained at 0.90%, while the overnight deposit rate stayed at minus 0.15%. The announcement was largely in line with market expectations.

The Bank’s goal of achieving its inflation target in a sustainable manner and its wish to maintain a monetary policy similar to that of the European Central Bank once more motivated its decision. Headline inflation rose from 3.6% in September to an over five-year high of 3.8% in October, thus moving further above the Bank’s 3.0% target but remaining within its tolerance band of plus or minus 1.0 percentage point. Volatile fuel and unprocessed food prices, as well as the increase in excise taxes on tobacco products, were again the main drivers of the acceleration in inflation in the first month of the fourth quarter. The Bank expects that robust consumer spending and higher excise taxes will keep inflation above the 3.0% target in the coming months, partly offset by well-anchored inflation expectations. However, from mid-2019 inflation should reach the target in a sustainable manner, pushed down by softening economic activity and declining oil prices.

The Bank restated that loose monetary conditions remain necessary in order to sustainably bring inflation towards the 3.0% target. However, it also reiterated its plan to normalize the monetary stance in the near-term; the timing and intensity of which will depend on the monetary policy decisions taken by the European Central Bank and the evolution of the outlook for inflation.

The next monetary policy meeting will be held on 18 December.

Hungary Interest Rate Forecast

FocusEconomics Consensus Forecast panelists see the base rate ending 2019 at 1.26%. For 2020, the panel sees the base rate ending the year at 1.55%.

Author: Massimo Bassetti, Senior Economist

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Hungary Monetary Policy Chart

Hungary Monetary Policy November 2018

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

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