Hungarian central bank (MNB) rate-setters on Tuesday kept the base rate on hold at 0.60 percent and also decided to maintain the interest rate corridor.
In a statement released after the meeting, the central bank’s Monetary Council said it would stick to its current policy stance but reallocate liquidity from its collateralised lending facility to its quantitative easing programme, stepping up purchase volume and standing ready to expand purchases to securities under ten years.
“In order to use its instruments affecting longer maturities more effectively, the [MNB] will reallocate liquidity provided under its individual programmes from the collateralised lending facility towards government securities purchases while keeping its monetary policy stance unchanged. In addition, it will be ready to extend its government securities purchases to include government securities with maturities of less than ten years, thereby ensuring continuous liquidity in the government securities market over the middle segment of the yield curve,” the council said.
“The [MNB] will continue to apply a flexible approach to the amount of its weekly government securities purchases, increasing its direct purchases in the secondary market relative to the past,” they added.
The council reiterated that the MNB will use the QE programme “to the extent and for the time necessary”, “maintaining a lasting presence in the market”.
The council acknowledged that the role of the MNB’s collateralised lending facility is “gradually decreasing” with the acute phase of the crisis subsiding.
The council also repeated its earlier policy stand in the statement.
“The monetary conditions established at the short end support price stability, the preservation of financial stability and the recovery of economic growth in a sustainable manner,” the policy makers said.
The council also reiterated that it is “key” to keep short-term yields at a “safe distance from a range close to zero” as well as their commitment to “maintaining price stability during the coronavirus pandemic”.
The council said it closely monitors “the persistence of inflationary effects” resulting from the economic recovery as well as “possible inflationary effects of financial market developments”.
“If warranted by a change in the outlook for inflation, the [MNB] will be ready to use the appropriate instruments,” the council added.