However, the rate-setters have made use of “unconventional, targeted” instruments to ease monetary policy further, such as placing a limit on the central bank’s main instrument for sterilising liquidity as well as modifying the interest rate corridor, a band around the base rate that prevents extreme fluctuations of interbank rates.

At the meeting on Tuesday, the council left the interest rate corridor unchanged, with the O/N collateralised loan rate at 0.90 percent and the O/N central bank deposit rate at -0.05 percent.

In a statement released shortly after the meeting, the council repeated its earlier stand on keeping the base rate on hold “for an extended period”, while staying prepared to ease monetary conditions with unconventional instruments.

“If the assumptions underlying the [NBH]’s projections hold, maintaining the current level of the base rate and loose monetary conditions achieved through the change in monetary policy instruments for an extended period is consistent with the medium-term achievement of the inflation target and a corresponding degree of support to the economy,” according to the statement.

“If inflation remains persistently below the target, the Council will stand ready to ease monetary conditions further using unconventional, targeted instruments,” the rate-setters added.

The council said a “watchful approach” to monetary policy is justified because of uncertainty in the global financial environment.

Republished with permission of Hungary Matters, MTI’s daily newsletter.