Hungarian Parliament building

Hungary Monetary Policy April 2020

Hungary: MNB keeps base rate unchanged in April; announces QE program

On 28 April, the Monetary Council of the Hungarian National Bank (MNB) kept the base rate and the overnight deposit unchanged at 0.90% and minus 0.05%, respectively, after unexpectedly hiking the overnight and one-week collateralized lending rates to 1.85% from 0.90% on 7 April. Furthermore, it also announced a bond purchasing program in a bid to mitigate economic and financial risks stemming from the Covid-19 pandemic.

The Bank made its decision on 28 April as it noted that inflation, which decelerated to 3.9% in March (February: 4.4%), returned to its tolerance band of 3.0% plus or minus 1.0 percentage points. The Bank added that it expects inflation to fall below the 3.0% target in the coming months amid lower fuel prices.

Meanwhile, to maintain financial stability during the pandemic, the MNB announced a government security buying program in the secondary market, while also reopening mortgage bond purchases to increase long-term funding to the banking sector. Both will be launched on 4 May and will continue for as long as warranted by the economic developments due to the virus.

In terms of forward guidance, the MNB stated that it will closely monitor incoming data and any potential changes to the outlook due to the impact of Covid-19, and stressed it will utilize “every instrument at its disposal to achieve price stability and support the Hungarian economic and financial system”.

The next interest-rate setting meeting is scheduled for 26 May.

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