Hungarian rate-setters left the base rate unchanged at 0.9 percent at a monthly policy meeting on Tuesday.
The Monetary Council also left the overnight deposit rate unchanged at -0.05 percent. The rates were also kept on hold at the previous policy meeting. The Council has left the base rate on hold since signalling an end to an easing cycle at a policy meeting in the spring of 2016.
At a meeting in March, National Bank of Hungary rate-setters raised the overnight deposit rate by 10 basis points, marking the first policy tightening in years. In a statement released after the meeting, the council said macroeconomic data released since the previous policy meeting bear out the baseline projections in the NBH’s latest quarterly Inflation Report, released a month earlier.
“Incoming data confirm the baseline projection in the June Inflation Report,” the council said, explaining that the pace of price growth started to slow in the summer months as the NBH’s measure of core inflation excluding indirect tax effects, a bellwether indicator of underlying inflation, fell to 3.5 percent in June.
The council reiterated that core inflation excluding indirect tax effects is likely to “decline gradually” to 3 percent from the end of 2019. Incoming data also “suggest that the dynamics of GDP growth is likely to slow down gradually from the second quarter”, “in line with our expectations”, it added. The council relies “mainly” on the projections in the Inflation Report when taking monetary policy decisions. The council repeated that it “applies a cautious approach” to monetary policy decisions, and that future developments in the outlook for inflation would be “a decisive factor in the necessity of further measures”.