Hungary’s Monetary Policy Held Unchanged

August 21, 2018

The Monetary Council at Magyar Nemzeti Bank kept its interest rate structure unchanged. Hungary’s deposit rate has been at -0.15% since a 10 basis point cut last September, and the overnight and one-week collateralized lending rates have been at 0.90% since a cut of 15 bps in May 2016. A released statement also keeps other monetary instruments steady:

The Council will maintain the HUF 75 billion upper limit on the stock of three-month deposits….┬áIn June, the Monetary Council set the maximum stock of monetary policy interest rate swaps in the first three quarters of 2018 at HUF 900 billion. The Bank will continue mortgage bond purchases and the monetary policy interest rate swap facility as programmes, and therefore they constitute an integral part of the set of monetary policy instruments. Financing costs fell as a result of the mortgage bond purchases, which encouraged issuance in the primary market, thereby facilitating the increase in fixed-rate lending.

The Monetary Council projects dynamic growth, lessening foreign debt, sustainable fiscal policy, and a convergence of inflation on the 3.0% target around mid-2019, with core rising to that level from 2.5% now and total CPI easing back from 3.4%. An unchained policy mantra remains “The Council will ensure the maintenance of loose monetary conditions, necessary to achieve the inflation target in a sustainable manner, by using the current set of monetary policy instruments.” But the volatile international environment mandates a “cautious approach.”

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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