Hungary Monetary Policy March 2018


Hungary: Central Bank stands pat in March

March 27, 2018

At its latest monthly monetary policy meeting held on 27 March, 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%, while the overnight deposit rate stayed at minus 0.15%. The announcement was widely expected by markets.

Maintaining very accommodative monetary conditions is considered necessary by the MNB to prop up prices and reach the inflation target of 3.0% plus or minus 1.0 percentage point by the middle of 2019. VAT tax cuts and reductions in employers’ social contributions will exert downward price pressures throughout this year, keeping inflation subdued despite strong economic growth. The Central Bank left its inflation forecasts unchanged in the March meeting and still expects inflation to reach its target under current monetary conditions.

The Bank’s forward guidance remained unchanged this month, reaffirming that monetary conditions will remain accommodative for a “prolonged period of time”. The MNB said it will closely monitor developments in the real and monetary sectors and will act to ensure monetary conditions remain accommodative if conditions change. This implies that further monetary loosening is more likely than a rate hike in the foreseeable future.

The next monetary policy meeting will be held on 24 April.

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 February 2018

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

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