Hungary Central Bank Leaves Base Rate Unchanged

(RTTNews) - Hungary's central bank maintained its benchmark interest rates on Tuesday, as policymakers assessed that the current level of the base rate is adequate to manage the fundamental inflation risks.

The Monetary Council of the Magyar Nemzeti Bank decided to leave the base rate unchanged at 13.00 percent, in line with economists' expectations.

The previous change in the rate was a 125 basis point hike in September last year.

Citing high inflation, the central bank had raised the key interest rate in every policy session since June last year.

According to the Monetary Council, the still favorable risk environment has enabled the bank to maintain the prior rate of interest rate normalization.

In response to this, the Council resolved to cut the interest paid on optional reserves by 100 basis points from 16 percent to 15 percent.

In addition, the overnight collateralized lending rate serving as the top of the interest rate corridor was lowered by 100 basis points to 17.5 percent. 

Policymakers assessed that keeping the base rate at its current level will ensure that inflation expectations are anchored and the inflation objective is met in a sustainable way.

Recent official data showed headline inflation easing to a 9-month low of 20.1 percent in June, which was well above the central bank's tolerance band of 2-4 percent.

The bank concluded that if the improvement in risk perceptions persists, it will continue the gradual convergence of the interest rate conditions of one-day tenders to the base rate at the previous pace.