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MNB explains decision to start tightening cycle

MNB

MNB building in Budapest.

According to the minutes from the monthly policy meeting released on the central bank's website, the decision by the Monetary Council of the National Bank of Hungary (MNB) to start a tightening cycle in June sent a clear message concerning policy makers' commitment to low inflation.

"With a general tightening of monetary policy conditions, the cycle of base rate hikes was a definite indication to economic agents that monetary policy was committed to low inflation," the minutes of the meeting held on June 22 say.

"The Monetary Council unanimously argued that the cycle of interest rate hikes would need to be continued until the inflation outlook stabilized around the central bank target, and inflation risks became evenly balanced on the horizon of monetary policy," according to the minutes.

"Decision-makers agreed that the council would conduct the cycle of interest rate hikes gradually, in a data-driven manner at its monthly policy meetings," the minutes add.

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