The Monetary Council of the National Bank of Hungary (NBH) decided to leave the central bank base rate unchanged, at 0.60%, at a monthly policy meeting. The Council also decided to leave the O/N deposit rate at -0.05% and the O/N and one-week collateralised loan rates at 1.85%. The O/N deposit rate and the collateralised loan rate mark the bottom and the top, respectively, of the central bank’s “interest rate corridor”. The base rate is paid on mandatory reserves and preferential deposits.
In a statement released after the meeting, the Council said “the monetary conditions established at the short end support price stability, the preservation of financial stability and the recovery of economic growth in a sustainable manner”, without making any direct reference to the 0.60% base rate, as in earlier policy meeting communications. The Council reiterated that it is “key” to keep short-term yields at a “safe distance from a range close to zero” as well as its commitment to “maintaining price stability during the coronavirus pandemic”. The Council said it closely monitors “the persistence of inflationary effects” resulting from the economic recovery as well as “possible inflationary effects of financial market developments”. “If warranted by a change in the outlook for inflation, the [NBH] will be ready to use the appropriate instruments,” the policy-makers said.