Hungary Monetary Policy April 2017


Hungary: Central Bank stays put in April

April 25, 2017

At its 25 April monetary policy meeting, the Monetary Council of the Hungarian National Bank (MNB) met market expectations by leaving the base rate unchanged at its current record low of 0.90% and by keeping all remaining monetary policy instruments on hold. The one-week collateralized lending rate for banks and the overnight collateralized lending rate stood at 0.90% and the overnight deposit rate at minus 0.05%. The upper limit on the stock of three-month central bank deposits was also left unchanged at HUF 500 billion after the MNB lowered the limit in the last meeting held on 28 March.

The decision to maintain the current policy stance comes as no surprise. According to the Bank, the economy is evolving broadly in line with their expectations and its current policy is suitable to prop up inflation and support economic growth. Inflation is expected to reach its objective in the first half of 2018 thanks to lax monetary policy, wage growth and solid economic activity, which is expected to record “a remarkable expansion in the first quarter of 2017.”

The Bank provided very 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 warranted, the Bank reiterated their commitment to lower rates even further if inflation “remains persistently below” the current target of 3.0%. “

The next Central Bank meeting will be held on 23 May.

FocusEconomics Consensus Forecast panelists see the base rate ending 2017 at 0.92%. For 2018, the panel sees the base rate ending the year at 1.34%.

Author: Jean-Philippe Pourcelot, Economist

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Hungary Monetary Policy Chart

Hungary Monetary Policy March 2017

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

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