Hungarian Parliament building

Hungary Monetary Policy January 2020

Hungary: MNB keeps rates on hold in January meeting

On 28 January, the Monetary Council of the Hungarian National Bank (MNB) kept the base rate on hold at a historical low of 0.90% and kept all other existing instruments unaltered, as had been largely expected. The MNB raised the overnight deposit rate in March 2019, but has since stayed put, while the world’s major central banks have lowered rates amid subdued global growth dynamics.

The Bank’s decision to keep rates unchanged largely reflected muted European economic activity, even as inflation jumped to 4.0% in December from 3.4% in November, due to the base effect of fuel prices. The Bank noted that it expects inflation to return to its tolerance band of 3.0% plus or minus 1.0 percentage point by the end of the first quarter, before stabilizing at its 3.0% target by 2021–2022 amid subdued external activity, which ought to contain inflationary pressures.

Looking ahead, the MNB maintained an accommodative stance in its communiqué, stating that risks to inflation are balanced due to softening recession fears in the Euro area. The Bank will, however, apply a cautious approach and any further measures will depend on future developments affecting the outlook for inflation.

The next meeting is scheduled for 25 February.

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