Hungarian National Bank Sets Base Rate to Prioritize Price Stability
Hungarian Central Bank Maintains Base Rate Amid Inflation Concerns
The Monetary Council of the National Bank of Hungary (NBH) convened on Tuesday and decided to keep the central bank base rate steady at 6.50%. This decision underscores the bank’s cautious approach to managing inflation and economic stability amid ongoing global uncertainties.
Stability in Interest Rates
In addition to the base rate, the Council reaffirmed the overnight (O/N) deposit rate at 5.50% and the O/N collateralised loan rate at 7.50%. These rates form the boundaries of the bank’s symmetric interest rate corridor, which is designed to manage liquidity and influence credit conditions in the economy.
In a statement following the meeting, the Council highlighted its dedication to achieving the inflation target sustainably. Policymakers noted the importance of a "careful and patient" approach to monetary policy, given the risks posed by the current inflation climate, trade policies, and geopolitical tensions.
“Maintaining tight monetary conditions is warranted,” emphasized the Council.
Insights from the Central Bank Governor
During a press conference, central bank governor Mihaly Varga reported a continued slowdown in inflation rates as of April, with expectations of approaching the upper limit of the NBH’s 3% ±1% tolerance band in the coming months. However, he also raised concerns about increased inflation risks due to the timing and diverse impacts of recent tariff announcements. Furthermore, he noted a rise in market volatility and heightened risk aversion in emerging markets.
Governor Varga stressed the necessity of maintaining financial market stability and managing inflation expectations as a vital priority for the bank. He indicated that the decision to keep the base rate unchanged aligns with the Council’s "stability-oriented" strategy, suggesting that the base rate could remain at its current level for an extended period.
Focus on Price Stability
In response to questions, Varga assured that the new management of the NBH is committed to transparency and is actively streamlining the bank’s operations. He reiterated that the NBH must prioritize its core objectives, particularly achieving price stability, over other functions such as operating foundations.
Discussions with the government regarding potential amendments to the central bank act have concluded, with plans to present a bill to lawmakers in the near future.
For more information on the central bank’s policies and updates, you can explore related articles linked within our publication.
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