Hungarian Parliament building

Hungary Monetary Policy February 2023

Hungary: MNB stands pat in March

At its 28 March meeting, the Monetary Council of the Hungarian National Bank (MNB) left its base rate unchanged at 13.00% for the sixth consecutive meeting. Moreover, the Bank left the overnight deposit rate and the overnight collateralized lending rate unchanged at 12.50% and 25.00%, respectively.

The Bank reiterated that it would keep interest rates at their current level for a protracted period, as it expects previous hikes to have a disinflationary effect. This, together with moderating commodity prices, declining international freight costs and cooling domestic demand should bring inflation within the Bank’s target range of 3.0% plus or minus one percentage point in 2024. The headline inflation rate decelerated to 25.4% in February from 25.7% in January, and the Bank expects it to average 15.0%–19.5% this year, 3.0%–5.0% in 2024 and 2.5%–3.5% in 2025.

Looking ahead, the Bank sees the current rate as adequate to manage inflation risks. The MNB expects inflation to slow gradually at first and then more rapidly in the second half of the year. That said, loosening the stance is not currently on the table; the Bank reiterated that it would keep monetary conditions tight until “inflation expectations are anchored and the inflation target is achieved in a sustainable manner”.

Commenting on the release, economists at ING stated:

“Overall, the outcome of the March rate-setting meeting strengthened our view that we won’t see any change in the monetary policy setup until June. The forward guidance echoes this, with the central bank focusing on the “persistent changes in risk perceptions when setting the conditions of overnight instruments introduced in mid-October” – in our interpretation, this ‘persistence’ means several months. Against this backdrop, the central bank’s hawkishness will likely remain a key alignment point for market players.”

The next monetary policy meeting is scheduled for 25 April.

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