The Monetary Board of the National Bank of Hungary (MNB) may consider raising the base rate at a policy meeting in June, said Deputy Governor Barnabás Virág mentionned Monday, Reuters reported.
Virág said Hungary’s monetary policy would enter a new phase from June, with the economy fully reopening, and the central bank would proactively adjust short-term rates to deal with growing inflation risks. .
He said rate hikes could precede any asset purchase decision and that the MNB’s next quarterly inflation report, which the Monetary Council will discuss at the June policy meeting, would be key to assessing the risks.
“It will be a data-driven, multi-step process… and the possibility of an increase in the base rate is worth considering as early as June,” Virág told reporters.
He said the economy would rebound dynamically from the pandemic-induced shock, with GDP growth closer to 6% this year, due to a surge in demand.
Virág said the risks of upside inflation had clearly increased since March and the MNB would do anything to prevent second-round effects.
“We should not underestimate the risks of a sustained rise in inflation, and we will react to inflation risks proactively,” Reuters said, quoted by Virág.
“We will deploy a mixed strategy: we will proactively shape short-term rates… working on the phasing out of crisis management tools in parallel,” he said.
He said the bank would respond to sustained inflation risks by changing its policy rate, while the one-week deposit rate would be used to deal with short-term risk premium shocks, Reuters reported.
EC raises its GDP growth forecast in Hungary for 2021
The European Commission predicts that Hungary’s GDP will grow by 5.0% this year in a spring economic forecast released on Wednesday. The projection was increased by 4.0 percent in the EC’s winter forecast released in February. The Hungarian government estimates 2021 GDP growth at 4.3%. The new EC projection for average GDP growth for Europe […]continue reading
The base rate of the MNB has remained unchanged at 0.60% since July 2020.