Hungary Monetary Policy December 2019


Hungary: MNB stays put in December meeting

December 17, 2019

On 17 December, the Monetary Council of the Hungarian National Bank (MNB) kept the base rate unchanged at a historical low of 0.90% and held all other existing instruments steady. The decision was in line with market expectations. After raising the overnight deposit rate in March, the MNB has since kept rates unchanged, while the world’s major central banks have lowered rates amid slowing global growth dynamics.

The decision to hold rates came against the backdrop of subdued European economic activity. Domestically, however, inflation rose to 3.4% in November from 2.9% in October, amid upbeat domestic demand, and is expected to rise further until January next year due to the base effect of fuel prices and the increase in food prices. That said, the Bank indicated that it expects inflation to fall and stabilize at its 3.0% target by 2021–2022. Meanwhile, the Bank raised its growth projections for 2020 and 2021 to 3.7% and 3.5%, respectively (previously: +3.3% for both 2020 and 2021) as strong wage growth is expected to remain in the private sector and investment activity is seen remaining buoyant.

Looking ahead, the MNB maintained an accommodative stance, although its message turned a bit less dovish as risks to inflation have become balanced again amid easing recession concerns in the Euro area. The Bank will, however, maintain a cautious approach and future developments affecting the outlook for inflation will decide the need of any further measures.

The next meeting is scheduled for 28 January.

FocusEconomics Consensus Forecast panelists expect the base rate to end 2020 at 0.99%. For 2021, the panel projects the base rate to end the year at 1.10%.

Author:, Economist

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Hungary Monetary Policy Chart

Hungary Monetary Policy December 2019

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

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