Hungarian National Bank

September 20, 2016

The Base Rate of Magyar Nemzeti Bank was left unchanged as expected at September’s monetary council meeting. It’s been 0.90% since three consecutive monthly reductions in March-through-May of 15 basis points. Earlier it was cut incrementally from 7.0% starting in August 2012 to 2.1% by July 2014 and additionally by 15 bps each in March-through-July to 1.35%. A¬†released statement¬†observes that Hungary’s output gap remains negative and that inflation is unlikely to climb all the way back to the target of 3.0% until around the middle of 2018. Accordingly, the base rate will not be raised for an extended period, and a need continues to ease monetary conditions, which is being done by gradually relaxing the liquidity absorption cap on deposits. However, the need to reduce the Base Rate appears to be off the table, because officials perceive that disinflationary forces are now easing.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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