Hungary’s central bank left its interest rates unchanged on Tuesday, after cutting the deposit rate deeper into the negative territory in September.
The Monetary Council of the Magyar Nemzeti Bank kept the base rate at 0.90 percent, in line with economists’ expectations. The bank held the rate steady for a seventeenth month in a row.
The central bank had cut the key rate by 15 basis points in March last year, which was the first reduction in eight months. Similar size cuts were repeated in April and May last year.
The overnight central bank deposit rate kept at -0.15 percent this month, after its was lowered by 10 basis points in September. The rate was cut to negative last year.
The lending rate was kept unchanged at 0.90 percent.
“The post-meeting press release is certain to remain very dovish, but we’re increasingly concerned that policy will be kept too loose for too long,” Capital Economics economist Liam Carson said.
“In our view, it’s hard to square this stance with the underlying macroeconomic environment,” the economist said.
Capacity constraints and wage growth are rising. Core inflation at a three-and-a-half year high of 2.9 percent is just a tad below the bank’s 3 percent inflation target, Carson noted.
“We think inflation has further to rise and will breach the National Bank’s target next year,” the economist said.
“Rising inflation will force the MPC to reverse course next year, there’s a growing chance that policy remains too loose, resulting in a nastier inflation shock – and more aggressive rate hikes – further down the line.”
The material has been provided by InstaForex Company – www.instaforex.com