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MNB policy-makers keep base rate on hold

Initiatives

Jessica Fejos

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.  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.

The Council also left the O/N central bank deposit rate at -0.15% and the O/N collateralized loan rate at 0.90% on Tuesday, reported state news agency MTI. 

"In the Council’s assessment, maintaining the base rate and the loose monetary conditions at both short and long ends for an extended period is necessary to achieve the inflation target in a sustainable manner," the rate-setters reiterated in a statement released after the meeting. 

"The Council will closely monitor developments in monetary conditions and will ensure the persistence of loose monetary conditions over a prolonged period by using the extended set of monetary policy instruments," the statement added. Rate-setters have lately 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 policy interest rate swap (MIRS) facility as programs "continuously and for a prolonged period," describing them as "an integral part of the set of monetary policy instruments."

"The Monetary Council focuses on the relative position of domestic long-term yields relative to international yields when evaluating the program," the rate-setters noted, while pointing out that domestic long-term yields have "fallen significantly overall in the past months" and that spreads relative to eurozone and regional yields have "significantly narrowed."

The condensed minutes of Tuesdayʼs meeting will be published at 2 p.m. on Wednesday, February 14.

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