Rate-setters conclude further tightening 'warranted'


MNB headquarters

Members of the Monetary Council of the National Bank of Hungary (MNB) "unanimously argued" to continue a rate-hike cycle at a monthly policy meeting in August and concluded that a further tightening of monetary conditions was "warranted", the minutes from the meeting on August 24 show.

"Council members unanimously argued that the proactive interest rate hiking cycle started in June should be continued in August and the base rate and the interest rate corridor should be raised by an additional 30 basis points," according to the minutes.

"Members concluded that in order to ensure price stability, prevent second-round inflationary effects and anchor inflation expectations, a further tightening of monetary conditions was warranted," the minutes show.

Members were also unanimous in their view to continue gradually phasing out the central bank's crisis management instruments "in order to tighten monetary conditions effectively".

The policymakers decided to start tapering at the meeting and reduced the target amount for weekly government securities purchases in the framework of the MNB's quantitative easing program from HUF 60 billion to HUF 50 bln.

Members highlighted that aspects of maintaining stability in the government securities market had to be "monitored closely" while the QE program was being phased out, the minutes show.

The minutes confirmed the council will "perform a comprehensive assessment of the results achieved by the cycle of interest rate hikes" and "identify risks to the inflation outlook" in light of the MNB's next quarterly Inflation Report which will be published in September.

"The Monetary Council would continue the cycle of interest rate hikes until the outlook for inflation stabilized around the central bank target in a sustainable manner and inflation risks became evenly balanced on the horizon of monetary policy," according to the minutes.

The minutes show the Council voted unanimously to raise the base rate by 30 bp to 1.5% at the August meeting.


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