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Still no change in base rate by MNB policymakers

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MNB headquarters in Budapest (Image by Jessica Fejos)

As expected, the Monetary Council of the National Bank of Hungary (MNB) decided once again to keep the central bankʼs key rate on hold at 0.90% at a monthly policy meeting on Tuesday, national news agency MTI reported.

The Council also left the O/N central bank deposit rate at -0.15% and the O/N collateralized loan rate at 0.90% at the 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.

At an earlier policy meeting in September, the Council said it was "prepared for the gradual and cautious normalization of monetary policy," and announced changes to make policy tools affecting short-term yields more simple and transparent while fine-tuning policy instruments impacting long-term yields.

In a statement released after its latest meeting on Tuesday, the Council reiterated its earlier policy stand.

"The Council is prepared for the gradual and cautious normalization of monetary policy, which will start depending on the outlook for inflation. The inflation target is still expected to be achieved in a sustainable manner from mid-2019. To ensure this, in the Councilʼs assessment, maintaining the current level of the base rate and the loose monetary conditions is necessary," the rate-setters said. 

The Council repeated that the MNBʼs "primary objective" is to achieve the inflation target in a sustainable manner.

The Council noted that sentiment on international financial markets has been volatile since the previous policy meeting, observing that the current environment on global markets "continues to suggest a more cautious approach."

In the Councilʼs assessment, in parallel with the pick-up in domestic demand, Hungarian economic output is close to its potential level. Economic growth will pick up further in 2018, it added, before slowing down gradually from 2019 if the assumptions of the current projection hold.

The condensed minutes of the Council meeting will be released at 2 p.m. on December 5, MTI noted.

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