BUDAPEST: Hungarian rate-setters left the base rate unchanged at 0.90 percent at a regular meeting on Tuesday. The National Bank of Hungary’s decision was in line with market expectations.
The Monetary Council also left the interest rate corridor, a band around the base rate that prevents extreme fluctuations of interbank rates, unchanged. The over-night collateralised loan rate, the top of the range, stands at 1.15 percent, while the O/N central bank deposit rate is -0.05 percent.
In a statement, it said inflationary pressures “remain moderate for an extended period” “If the assumptions underlying the [NBH’s] projections hold, the current level of the base rate and maintaining loose monetary conditions for an extended period are consistent with the medium-term achievement of the inflation target and a corresponding degree of support to the economy,” the council said, echoing a statement made after the previous policy meeting in May.
“If the Monetary Council assesses it necessary in the future, it may also decide to use unconventional tools,” it added. It noted that a “watchful approach” to monetary policy is still justified because of uncertainty in the global financial environment. The bank raised its forecast for average annual inflation this year to 0.5 percent in its fresh quarterly Inflation Report from 0.3 percent in March and it raised its projection for 2017 inflation to 2.6 percent from 2.4 percent.
Inflation is projected to reach the tolerance band around the central bank’s 3 percent medium-term inflation target by the end of this year, slightly earlier than projected in the March report. The NBH left its GDP growth projections for both years unchanged: at 2.8 percent for this year and 3 percent for 2017.
The government projects 0.4 percent inflation this year and 0.9 percent next year. The official growth forecast is 2.5 percent for this year and 3.1 percent growth for 2017.
