NBH Says Risks Warrant "Careful" Approach to Monetary Policy

Highlights from the policy statement:

• Risks surrounding global disinflation and volatility in international investor sentiment warrant a careful approach to monetary policy… decisions on any further reductions in the base rate and their optimal pace will be made on the basis of this information, in a data-driven manner.
• As a result of the trend-like improvement in Hungary’s current account balance, the country’s risk perception improved further despite a volatile global sentiment. According to the Monetary Council, this allows the base rate to continue to be lowered.
• Disinflation is expected to continue in 2024 Q1, and as a result, inflation is likely to approach the upper bound of the tolerance band in the spring months.
• In the Monetary Council’s assessment, the long-term deposit facility has been successful in fulfilling its stabilising function, and therefore the Bank will discontinue its use with effect from 31 January.
• In addition, in the Council’s judgement, the use of the swap facility providing foreign currency liquidity in December 2023 contributed to the maintenance of stability in the swap market again, and therefore the MNB will continue to use the instrument.

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