MNB policymakers leave rates on hold


Photo by Adriana Iacob/

The Monetary Council of the National Bank of Hungary (MNB) decided to keep the central bank base rate at 0.90% and the O/N deposit rate at -0.05% at a monthly policy meeting on Tuesday, state news wire MTI reports.

Photo by Adriana Iacob/

The council also decided to leave the central bankʼs O/N and one-week collateralized loan rates unchanged at 1.85%.

The O/N deposit rate and the collateralized loan rate mark the bottom and the top, respectively, of the central bankʼs "interest rate corridor". The base rate is paid on mandatory reserves and preferential deposits.

In a statement issued after the meeting, the council noted that it had rolled out a number of "coordinated and targeted measures" in recent months to ensure "the required amount of liquidity is available for all economic agents at a wide range of maturities and with favorable conditions" in the face of the coronavirus crisis. These included a widening of the interest rate corridor, the activation of a one-week deposit facility and the introduction of a fixed-rate collateralized lending facility, as well as the launch of the FGS Go! scheme to promote lending to microbusinesses and SMEs.

"By transforming and expanding its set of instruments, the MNB increased its room for maneuver in monetary policy and ensured that it is able to give quick responses on the required scale to extraordinary challenges in every sub-market in the future as well," the council said.

In addition to the MNB measures, the council noted the impact in May of an improvement in sentiment and a decrease in volatility on global financial markets on financial market conditions in Hungary: the forintʼs exchange rate was "mainly in line" with other exchange rates in the region, long-term government securities yields "declined significantly", the yield curve flattened, and market liquidity improved.

The council said the decline in long-term government securities yields had come parallel with the MNBʼs government securities purchases program, launched on May 4.

The council added that the asset purchase program is a "crisis management instrument" which it intends to use "for the period and to the extent necessary".

The policymakers also said "the current set of monetary policy instruments is appropriate to respond to the economic and financial challenges posed by the coronavirus pandemic" and that "the previously set goals have been achieved by the transformed set of instruments", suggesting that the council has no immediate plans to add instruments to their arsenal.

"In line with its statutory mandate, the [National Bank of Hungary] will use every instrument at its disposal to achieve price stability and to support the Hungarian economic and financial system," the council reiterated.

The council also repeated its earlier forecast for core inflation excluding indirect tax effects - a bellwether indicator of underlying inflation - "to be around 3.2-3.5% on average in 2020, before decreasing gradually to 3%".

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