Hungary’s central bank leaves base interest rate intact


As analysts had predicted the week before, the Monetary Policy Council (MPC) of the National Bank of Hungary (MNB) decided to leave the base interest rate on lending unchanged at 0.9% yesterday. Other interest rates were also left unchanged.

The MPC had clearly signaled the end of its easing cycle in May, and no macro data or financial market development has altered the big picture over the last one month, CIB Bank analysts noted in a flash issued yesterday after the meeting. 

“In our view this implies unchanged interest rates for the rest of 2016 (at least) and potential extension of the room for manoeuvre would trigger quantitative and/or credit measures instead of changes of the interest rate level,” CIB analysts said. “The forint showed minimal appreciation versus the euro after the central bank’s announcements, partly offsetting preceding intra-day losses. The EUR/HUF cross rate still hovered close to the 314 level.”

Ahead of the publication of full reports scheduled for tomorrow, the MPC also discussed the updated Inflation Report and released the main CPI and GDP figures, CIB analysts said. “This suggests 0.5% and 2.6% average inflation for 2016 and 2017 respectively, versus 0.3% and 2.4% forecast in March. GDP projections were left unchanged for 2016 (2.9%) as well as for 2017 (3.0%)”, the flash by CIB notes.

The official statement issued by the central bank says that if the council assesses it necessary in the future, it may also decide to use unconventional tools, CIB said.


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