The National Bank of Hungary’s Monetary Council decided to keep the central bank’s key rate on hold at 0.90% at a monthly policy meeting. The council has left the base rate on hold since signalling an end to an easing cycle at a policy meeting in the spring of 2016. However, the rate-setters have made use of “unconventional, targeted” instruments to ease monetary policy further.
After recent policy meetings, the council has said it is “prepared for the gradual and cautious normalisation of monetary policy” but has signalled any tightening would start with adjustments to unconventional policy tools, before any changes to the base rate. The council also left the O/N central bank deposit rate at -0.15% and the O/N collateralised loan rate at 0.90% at the meeting. The two rates demarcate the central bank’s “interest rate corridor”.
In a statement released after the meeting, the council said that the probability of core inflation excluding indirect tax effects – a gauge that captures “persistent inflationary trends” – rising over 3% had increased. At the same time, market expectations about the timing of interest rate increases by the world’s leading central banks have “shifted to an ever later date”, suggesting loose monetary conditions may remain “for a longer period of time than earlier expected”, the council added.