Hungarian National Bank

March 27, 2018

Monetary policy settings were not changed by Hungary’s monetary council. The Base Rate remains at at 0.90%, its level since a 15 basis point cut in May 2016. The overnight deposit rate stays at negative 0.15%, its level since a 10-basis point reduction last September. A loose policy is justified because inflation still lies at the lower part of the target range is is not expected to rise to the target midpoint sustainably until the middle of next year. A released statement asserts

The Council’s aim is that the loose monetary conditions have their effect not only at the short but also at the longer end of the yield curve. To ensure this, the Bank will continue mortgage bond purchases and the monetary policy interest rate swap facility as programmes, continuously and for a prolonged period, and therefore they constitute an integral part of the set of monetary policy instruments. In harmony with the Council’s forward guidance, the new instruments contribute efficiently to the maintenance of the loose monetary conditions over a prolonged period and to an improvement in financial stability.

Officials project faster growth than 4.0% in 2018 but a gradual slowdown in 2019. The economy is now approaching its potential level, but wage pressures are not yet exerting meaningful upward pressure on inflation, which in February stood at 1.9%.

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



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