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MNB policy makers make no mention of future ‘fine-tuning’

Interview

Photo by Jessica Fejos

The Monetary Council of the National Bank of Hungary (MNB) said it would continue to use its extended set of monetary policy instruments, without making any mention of future "fine-tuning," in the minutes from its policy meeting on February 27.   

"The Council would closely monitor developments in monetary conditions and would ensure the persistence of loose monetary conditions over a prolonged period by using the extended set of monetary policy instruments," according to the minutes published last Wednesday, state news wire MTI reported.

In its previous communications, the Council had said the set of monetary policy instruments "might be fine-tuned in the future," but there was no mention of this in the minutes from the monthly policy meeting in February.

The Council unanimously decided to keep the central bankʼs key rate on hold at 0.90% at the 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, rate-setters have made use of "unconventional, targeted" instruments to ease monetary policy further. 

Commenting on the newest of these policy instruments intended to flatten the yield curve, the Council said the MNB would continue mortgage bond purchases and its monetary interest rate swap (MIRS) facility as programs "continuously and for a prolonged period," calling them "an integral part of the set of monetary policy instruments."

"Members agreed that in the assessment of the new instruments the relative position of Hungarian yields compared to international yields should be monitored closely," according to the minutes. 

The policy makers acknowledged a shift upwards on the short end of the yield curve, as well as a rise in long-term yield spreads amid the increase in yields on global markets. Over a longer horizon, however, spreads relative to the euro area and the region "decreased significantly," they added. 

The Council said that sentiment on international financial markets had, on the whole, "deteriorated" since the previous policy meeting, but added that investorsʼ perceptions about the Central and Eastern European region "continued to be positive."

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