MNB Cuts O/N Collateralised Loan Rate by 100 bp

MNB

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The Monetary Council of the National Bank of Hungary (MNB) decided to leave the base rate on hold at 13%, but voted to cut the central bank's O/N collateralized loan rate by 100 bp to 16.50% at a monthly policy meeting on Tuesday, state news wire MTI writes.

The council left the O/N deposit rate, at the bottom of the "interest rate corridor", at 12.5%.

The council has cut the O/N collateralized loan rate by 100 bp at each of their monthly policy meetings since May.

Quick Depo Tender Rate Cut 100 bp

In a statement released after the meeting, the council said it was also warranted to cut the interest rate on the MNB's one-day quick deposits offered at daily tenders by 100 bp.

The council also decided to reduce the interest rate paid on optional reserves by 100 bp to 14% with effect from August 30.

The council said it had "continued to normalize the interest rate environment at the previous pace in August".

"Maintaining the current level of the base rate will ensure that inflation expectations are anchored and the inflation target is achieved in a sustainable manner," the council said, adding that financial market stability is "also key" to achieving price stability.

The council said a "cautious and gradual approach" to monetary policy was warranted in the current environment.

"The [MNB] is constantly assessing the effects of international financial market developments on the domestic risk environment, incoming macroeconomic data, and developments in the outlook for inflation. If the improvement in risk perceptions persists, the [MNB] will continue to close the gap between the interest rate conditions of one-day tenders and the base rate," the policymakers added.

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