Hungary’s Monetary Policy November 2022

At the November 22nd meeting, the Monetary Board of the Hungarian National Bank (MNB) left the base rate unchanged at 13.00% for the second consecutive meeting. Moreover, the bank left the overnight deposit rate, the overnight secured lending rate and the one week secured lending rate unchanged at 12.50%, 25.00% and 15.50%, respectively.

The Bank reaffirmed that it expects to keep interest rates stable for a prolonged period of time after an aggressive tightening cycle to bring inflation within the Bank’s target range of 3.0% plus or minus one percentage point in early 2024. However, overall inflation accelerated to 21.1% in October from 20.1% in September, moving further above the bank’s target range. MNB expects inflation to decline only gradually in the first half of 2023 and more importantly in the second half of next year.

Looking to the future, the bank believes that the risks of inflation are the same, with upside risks arising from the continued rise in energy prices, and downside risks posed by the global economic slowdown and lower energy and other commodity prices. The Bank announced that it would maintain the current monetary conditions for a long period until “the goal of price stability is achieved”.

Commenting on the release, Peter Ferrofax and Frantisek Taborski, economists at ING, stated:

“The [MNB] Focused on ongoing shifts in financial market conditions, it will use its tools introduced in mid-October until there is a trend improvement in risk perceptions. In our view, this means that the central bank will take its time to assess the market outcome of a potentially positive end to the rule of law debate and will not react immediately to its monetary policy.

The next monetary policy meeting is scheduled for December 20.

Members of the FocusEconomics Consensus Forecast Committee are still assessing the latest developments and new forecasts will be released on November 29.

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