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Policymakers keep base rate on hold

The Monetary Council of the National Bank of Hungary (MNB) decided to leave the central bank base rate unchanged, at 0.60%, at a monthly policy meeting on Tuesday, state news wire MTI reports.

Photo by Adriana Iacob/

The council also decided on Tuesday to leave the O/N deposit rate at -0.05% and the O/N and one-week collateralized loan rates 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 released after the meeting, the council said "the monetary conditions established at the short end support price stability, the preservation of financial stability and the recovery of economic growth in a sustainable manner", without making any direct reference to the 0.60% base rate, as in earlier policy meeting communications.

The council reiterated that it is "key" to keep short-term yields at a "safe distance from a range close to zero" as well as its commitment to "maintaining price stability during the coronavirus pandemic".

It said that it closely monitors "the persistence of inflationary effects" resulting from the economic recovery as well as "possible inflationary effects of financial market developments".

"If warranted by a change in the outlook for inflation, the [MNB] will be ready to use the appropriate instruments," the policy-makers said.

One-week depo gap to stay "as long as warranted"

The council said MNB will continue to set the rate for its one-week deposit facility at weekly tenders "in response to the increase in risk aversion vis-a-vis emerging markets".

"The bank will maintain the difference between the base rate and the one-week deposit rate as long as warranted by inflationary risks," they added.

Days after policymakers decided to leave the base rate on hold at a policy meeting in September, the rate of the central bankʼs one-week deposit rate was raised by 15 bp to 0.75%. The measure caused some degree of surprise as the one-week deposit rate had tracked the base rate until then. The one-week deposit rate remained at 0.75% at the latest tender on Thursday.