Magyar Nemzeti Bank

December 20, 2016

Having cut Hungary’s key central bank interest rate by 45 basis points in March-May of this year to 0.90% and by 610 basis points since August 2012, monetary authorities shifted their focus from easing via progressive cuts in the interest rate to other monetary tools that promote the pass-through of a lower central bank rate to other market rates. According to today’s statement, which left the interest rate at 0.90%, this is being done by limiting “the three-month deposit stock and its potential future change.”

The Monetary Council aims to ensure that the limit imposed on the stock of three-month deposits exerts its expected easing effect efficiently. The limit is set quarterly. On the next occasion, a decision on its level as at end of the second quarter of 2017 will be made in March 2017.

In the Council’s assessment, some degree of unused capacity has remained in the economy while inflation is rising gradually to the target. The disinflationary impact of the real economy is gradually dissipating over the policy horizon. If the assumptions underlying the Bank’s projections hold, maintaining the current level of the base rate for an extended period and the loosening of monetary conditions by the change in the monetary policy instruments are consistent with the medium-term achievement of the inflation target and a corresponding degree of support to the economy.

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




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