New Surprise Base Rate Cut By Hungarian Central Bank

  • 22 Jul 2020 9:45 AM
  • Hungary Matters
New Surprise Base Rate Cut By Hungarian Central Bank
Central bank rate-setters have cut the base rate to 0.60%. The policy makers cut the base rate by 15 basis points for the second month in a row after leaving it unchanged for a little more than four years.

NBH deputy governor Barnabás Virág had said days after the June policy meeting that he would propose another 15-basis point reduction to the base rate at the next policy meeting, but he added that a rate under 0.60% was “not a possibility”.

The Council decided to leave the O/N deposit rate at -0.05% and the O/N and one-week collateralised loan rates at 1.85%.

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 Council said the 0.60% rate “supports price stability, the preservation of financial stability and the recovery of economic growth in a sustainable manner”.

It added that “in the current rapidly changing environment, it is key to maintain short-term yields at a safe distance from a range close to zero”.

The Council suggested that instruments other than the base rate would be used as additional stimulus, if necessary.

“In the event of a persistent deterioration in the outlook for growth, the Bank will deliver the required additional economic stimulus using its targeted instruments,

i.e. the Funding for Growth Scheme Go! and the Bond Funding for Growth Scheme, providing the most direct support to investment,” it said.

Click here to read the full report on Central Bank's website

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