MNB decision-makers reaffirm unchanged base rate

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Decision-makers at the National Bank of Hungary (MNB) reiterated the central bankʼs stand on using unconventional tools to achieve monetary policy goals, rather than changing the base rate, in a review of those tools published today.

“Limiting the allotment of three-month deposits has become an integral part of the central bankʼs toolkit, thus the MNB can support the achievement of central bank goals with unconventional measures in future while keeping the base rate unchanged,” Deputy Governor Márton Nagy and Managing Director Barnabás Virág said in the review, echoing statements made by rate-setters since summer. 

“The conditions for the MNBʼs loose monetary policy could remain in place until at least the end of 2017, but even until 2018-19,” they added.

Nagy and Virág outlined the impact of the central bankʼs unconventional measures on lower costs for borrowers and warned that a further reduction in the base rate could put the MNB in an environment where “the basic laws of economics and monetary policy may behave differently, presenting unintended adverse reactions.”

MNB Governor György Matolcsy said in an interview published earlier in November that the central bank could keep its base rate unchanged at 0.90% even if other central banks start a tightening cycle.

“We furnished and set a base rate that is functional for the long term, which can be maintained even if the Fed follows a gradual tightening cycle and the ECB or the Japanese central bank possibly respond,” Matolcsy told business daily Világgazdaság, as recalled by Hungarian news agency MTI. “Even in this case, we believe that the conditions for the MNBʼs loose monetary policy can remain in place until the end of 2017, or even, I believe, until 2018-2019,” the governor added.

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