Central Bank base rate could stay by the end of 2020


Hungaryʼs inflation rate could stay around the central bankʼs 3% "price stability" target even beyond the middle of 2019, if the new government launches reforms to boost competitiveness and productivity improves, National Bank of Hungary (MNB) deputy governor Márton Nagy said.

In an interview with Reuters on Wednesday, Nagy (pictured above) estimated that the Budapest Interbank Offered Rate (BUBOR), which is around 0% currently, could first start to increase around the end of 2019, "and, if this happens, then we can begin thinking about how to operate with the tools affecting either short or longer yields".

"The end of 2020 would be the time when we can begin to think about" the level of the base rate, Nagy said, as cited by national news agency MTI. The central bank was firmly focused on the 3% target, dismissing the view that it would be content to let inflation rise to 4%, the top of the +/- 1% tolerance band, to boost the economy. "The tolerance band can be used, but its use is justified in cases when there is a temporary increase in inflation, followed by a swift return to 3%," Nagy said.

While domestic inflation remains subdued and expectations anchored, external developments and the steps of the ECB would have a bigger bearing on the conduct of policy, Nagy told Reuters. "The ECB is also running loose monetary conditions, but the market expects that this will end at some stage. Its timing, pace and the steps are very important and can have a big impact on us as well," he said.

"As long as the ECB maintains loose monetary conditions, the Hungarian central bank also has room to manoeuvre to maintain them. It follows that it is more likely that the MNB will take any steps only after the ECB moves," Nagy added.


Surplus of External Trade in Services at EUR 2.69 bln in Q3 Trade

Surplus of External Trade in Services at EUR 2.69 bln in Q3

MPs Approve Tax Changes Parliament

MPs Approve Tax Changes

Industrial Producer Prices in Hungary up 41.7% y.o.y. in Oct... Manufacturing

Industrial Producer Prices in Hungary up 41.7% y.o.y. in Oct...

Hard Rock Hotel Opens 'Star Chalet' for Winter Season Hotels

Hard Rock Hotel Opens 'Star Chalet' for Winter Season


Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.