Rate-setter: Lower commodities prices, bigger bond purchases by banks support low interest environment


Jessica Fejos

The fall in global commodities prices as well as measures the National Bank of Hungary (MNB) has taken to draw lendersʼ liquidity into government securities, support a low central bank base rate for an extended period of time, MNB deputy governor Marton Nagy told Hungarian news agency MTI.

Nagy said the fall in global market prices was seen across a broad range of commodities, not only oil. This has created an extraordinarily favorable cost environment for the Hungarian economy that could put downward pressure on inflation projections not just for the short term but for the monetary policy horizon as well, he added.

Nagy called earlier conditions on Hungaryʼs government securities market "abnormal", when lendersʼ liquidity flowed into the central bankʼs two-week bills. The MNBʼs move to cut off direct access to the sterilization instrument by non-residents and extend its maturity to three months, thus channeling banksʼ extra cash into government securities, is returning the market to "normal", he added.

The MNBʼs rate-setters said after a policy meeting in August that loose monetary conditions could remain in place for "an extended period" on the condition that "the assumptions underlying the bankʼs projections hold".


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