Hungary Monetary Policy June 2017


Hungary: Central Bank leaves rates unchanged in June

June 20, 2017

At its 20 June 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 at minus 0.05%. The upper limit on the stock of three-month central bank deposits, which emerged as an integral monetary policy instrument, was reduced from HUF 500 billion to HUF 300 billion.

The decision to maintain the current policy stance comes as no surprise given benign inflation and solid yet stable economic growth. Inflation in the country has been evolving in line with the Bank’s expectations and is set to reach the Bank’s target of 3.0% in the first half of 2019 thanks to loose monetary policy, wage growth and solid economic activity. Likewise, The Monetary Council sees stable annual growth of between 3%-4% over the coming years supported in large part by the government and the Bank. The MNB decided to lower the upper limit on the stock of three-month central bank deposits to maintain loose monetary conditions and ample liquidity in the banking sector.

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 however inflation remains “persistently below” the current target of 3.0%, the Council has reaffirmed its commitment to lowering rates even further.

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

FocusEconomics Consensus Forecast panelists see the base rate ending 2017 at 0.90%. For 2018, the panel sees the base rate ending the year at 1.17%.

Author: Jean-Philippe Pourcelot, Economist

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Hungary Monetary Policy Chart

Hungary Monetary Policy May 2017 0

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

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