The building of the NBH in Budapest – Photo: wikimedia

Central bank leaves base rate on hold at 0.60 percent

Hungarian rate-setters decided to keep the base rate on hold at 0.60 percent in a regular meeting on Tuesday. The Monetary Council of the National Bank of Hungary (NBH) also decided to leave the O/N deposit rate at -0.05 pc and the O/N and one-week collateralised loan rates at 1.85 pc.

The O/N deposit rate and the collateralised loan rate mark the bottom and the top, respectively, of the central bank’s “interest rate corridor”. The base rate is paid on mandatory reserves and preferential deposits.

In a statement released after the meeting, the rate-setters said they had performed a revision on the central bank’s government securities purchase programme.

They acknowledged the success of the quantitative easing programme “even during the third wave of the pandemic and in a volatile international financial market environment” and said it had “contributed to maintaining a stable liquidity position in the government securities market and improved the effectiveness of monetary policy transmission”.

“The [NBH] will continue to use its government securities purchase programme by maintaining a lasting presence in the market, taking a flexible approach to changing the structure of weekly securities purchases, to the extent and for the time necessary,” the Council said.

“The [NBH] continues to be committed to maintaining price stability even during the third wave of the coronavirus pandemic. It is the [NBH]’s clear intention to prevent the current uncertain environment from causing a sustained rise in inflation,” the policy makers said.

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