Hungary Monetary Policy February 2021


Hungary: MNB stands pat in February

February 23, 2021

At its 23 February meeting, the Monetary Council of the Hungarian National Bank (MNB) decided to keep the base rate unchanged at the all-time low of 0.60%, and also held all other instruments steady, which was in line with market analysts’ expectations.

The MNB’s decision to stand pat was due to a resilient economy and sustained price pressures. The economy continued to expand sequentially in Q4, despite the reintroduction of restrictive measures, and conditions are expected to start normalizing in Q2 as vaccines become widely available. As such, the Bank sees growth for this year at the upper end of the 3.5%–6.0% range announced in December. On the price front, core inflation intensified in January due to an increase in excise taxes on alcohol and tobacco products, which will cause inflation to hover around 4% in the coming spring months before it starts to decline. Inflation is seen averaging 3.5%–3.6% in 2021 before easing to around 3.0% in 2022, with the main upside risk stemming from the increase in emerging-market risk aversion.

Looking ahead, the Bank maintained a moderately hawkish tone in its communiqué, as it reaffirmed that it stands ready to use appropriate instruments to contrast potential inflationary pressures stemming from the economic recovery and financial market developments. Furthermore, it reiterated that it considers the current monetary policy stance supportive of “price stability, the preservation of financial stability and the recovery of economic growth in a sustainable manner”.

The next monetary policy meeting is scheduled for 23 March.

FocusEconomics Consensus Forecast panelists see the base rate ending 2021 at 0.63% and 2022 at 0.77%.

Author: Massimo Bassetti, Senior Economist

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