Minutes confirm end of easing cycle, but suggest fine-tuning could follow


Image by Jessica Fejos

The National Bank of Hungaryʼs (MNB) Monetary Council decided to end the central bankʼs easing cycle at a policy meeting in May, the condensed minutes of the meeting released yesterday confirm. However, several rate-setters said monetary policy could be fine-tuned with unconventional tools.

The rate-setters decided to lower the base rate by 15 bps to 0.90% at the meeting on May 24. The Council cut the base rate by 15 bps at the previous two monthly meetings, as well. 

“With this step, the Monetary Council also decided to close the base rate cut cycle, although several members pointed out that fine-tuning of the monetary policy may become necessary, which justifies further analysis of the application of monetary policy instruments and that of non conventional ones in particular,” according to the minutes.

“Based on available information, the inflation outlook and the cyclical position of the real economy point to maintaining the 0.90% base rate for an extended period,” the Council said in the minutes.

The Council added that a “watchful approach” to monetary policy is still warranted due to “uncertainty in the global financial environment”.

The minutes show the Council voted 8:1 for the 15 bps cut. János Cinkotai, an external member of the Council who has been less dovish than his colleagues at earlier meetings, also voted to keep rates on hold, arguing that the base rate had “already reached the lowest level that can be sustained in a stable manner and can ensure the achievement of the inflation target over the forecast horizon”.

The rate-setters also decided at the meeting to lower the top of the interest corridor, a band around the base rate that prevents extreme fluctuations of interbank rates, by 15 bps, bringing the O/N collateralized loan rate to 1.15% while keeping the O/N central bank deposit rate at -0.05%.


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