Monetary Council Leaves Base Rate Unchanged at 13%

With its decision on Tuesday, the Monetary Council of the National Bank of Hungary (MNB) locked the overnight deposit rate and the base rate at 13%, and from Wednesday, the base rate will be the MNB's effective interest rate, with the overnight deposit rate to be phased out from October. This will mark the end of the normalization of the extraordinary interest rate environment introduced in October 2022 and the start of a new phase of monetary policy, the Monetary Council said in a statement following its interest rate decision meeting.   

The Monetary Council left the base rate unchanged at 13.0%, but further tightened the interest rate corridor, with the lower bound falling by 50 basis points to 12.0% and the upper bound by 250 basis points to 14.0% from 16.5%.

The MNB last raised the base rate on September 27 last year, by 125 basis points to 13.0%, and announced the end of the base rate hike cycle after the meeting.

However, monetary tightening continues in October by other means. The MNB made a special announcement to raise the interest rate on the regular one-day central bank deposit tenders to 18%, and then cut it by 100 basis points at each rate-setting meeting from May onwards.

By bringing the overnight quick tender rate and the base rate together, monetary policy enters a new phase, which provides an opportunity to design a simpler set of instruments to fit the changed environment, they said.