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May 29, 2019

NBH leaves base rate on hold

The NBH has left the central bank base rate and overnight deposit rate unchanged at 0.90 percent and -0.05 percent, respectively.

The National Bank of Hungary (NBH) has left the central bank base rate and overnight deposit rate unchanged at 0.90 percent and -0.05 percent, respectively.

At a meeting in March, the Monetary Council raised the overnight deposit rate by 10 basis points, marking the first policy tightening in years. They also decided to reduce a targeted squeeze-out of liquidity from central bank instruments by 100 billion to 300 billion-500 billion HUF.

According to MTI, the Council said inflation “will fluctuate around” the 3 percent central bank target in the coming quarters, while the measure of core inflation excluding indirect tax effects — an indicator of underlying inflation — is “expected to continue to rise until the autumn months and then to decline from the end of 2019”.

The Council noted that “persistently buoyant” domestic demand is boosting the pace of price increases, while weakening external activity is restraining that pace, and said it would assess the effects of this “dichotomy” on the maintenance of price stability over the 5-8 quarter horizon of monetary policy.

“The monetary policy stance will continue to be accommodative, economic agents’ financing costs will remain favourable,” the Council said, adding that it applies a “cautious approach” to policy decisions and relies “mainly” on the macroeconomic and inflation projections in the National Bank of Hungary‘s quarterly Inflation Report.

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