Hungarian Parliament building

Hungary Monetary Policy February 2020

Hungary: MNB stays put in February meeting

On 25 February, the Monetary Council of the Hungarian National Bank (MNB) kept the base unchanged at the historical low of 0.90% and held all other existing instruments steady. The decision was in line with market expectations. After hiking the overnight deposit rate in March 2019, the MNB has since stayed put, while many of the world’s major central banks have lowered rates amid muted global growth dynamics.

The Central Bank held rates against the backdrop of persistently muted external activity, and despite inflation climbing to a seven-year high of 4.7% in January, from 4.0% December. The Bank noted that the rise in inflation will be temporary, stemming from higher fuel and food prices. 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 on subdued external activity, which is expected to contain inflationary pressures.

Looking ahead, the MNB maintained an accommodative stance in its communiqué. However, its message turned slightly more hawkish, with the Bank pledging to use all its tools to reach the inflation target should a lasting change in the outlook for inflation warrant policy action.

The next meeting is scheduled for 24 March.

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