National Bank of Hungary (NBH) policymakers noted at a monthly policy meeting in January the recovery in the industrial and construction sectors and the positive impact of government stimulus, but warned that “significant uncertainty” arose from the possibility of rising risk aversion, the inflationary effects of higher indirect taxes, and the pace of vaccinations. Monetary Council members said government support “to mitigate the adverse economic effects of coronavirus and measures to stimulate credit market growth” had helped to keep the jobless rate low. “Despite favourable data, Monetary Council members agreed that a potential increase in risk aversion vis-a-vis emerging markets, the inflationary effects of changes in indirect taxes and future developments in vaccination created significant uncertainty in terms of Hungary’s macroeconomic outlook,” according to the minutes of the meeting released on Wednesday.
The policymakers noted in a statement released immediately after the January policy meeting that changes to indirect taxes were expected to raise inflation by 0.8 of a percentage point in 2021. They also said the increase in risk aversion with regard to emerging markets “continues to pose the greatest risk” to the inflation outlook. The Council voted unanimously at the meeting on January 26 to keep the central bank base rate unchanged at 0.60%.