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Bank leaves all rates unchanged as expected
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CPI marginally lower at 25.4% y/y in February
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Hungary to run EU's highest inflation rate in 2023
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NBH sticks to hawkish stance amid market risks
(Recasts with cenbank statement, analyst, updates forint)
By Gergely Szakacs and Krisztina Than
BUDAPEST, March 28 (Reuters) - The National Bank of
Hungary (NBH) left its base rate unchanged at 13% on
Tuesday and kept its hawkish stance, saying that 2024 inflation
would be higher than previously anticipated and that global
market risks have increased.
The bank, which has recently come under pressure from the
government to start trimming its interest rates as inflation is
expected to slow from an annual 25.4% in February, made no hint
of any room for policy easing in its statement.
Hungary's economy is expected to slow sharply this year.
"It is necessary to maintain the current level of the base
rate over a prolonged period, which will ensure that inflation
expectations are anchored," the Monetary Council said.
Deputy Governor Barnabas Virag told an online briefing that
"patience and discipline" was warranted in monetary policy, and
Tuesday's rate decision was unanimous.
Virag said the bank would also apply a patient approach with
respect to the one-day quick deposit tool, which carries an 18%
interest rate, and will monitor the narrowing of the current
account deficit and changes in the risk perception of emerging
markets before it considers any change. The bank will also
continue to tighten forint liquidity with its tools.
The decisions to leave both the European Union's highest benchmark rate and the bank's 18% quick deposit rate unchanged were in line with the unanimous forecast of economists in a Reuters poll last week.
By 1354 GMT, the forint firmed to 381.55 to the euro, from 384.35 just before the rate announcement. Virag said curbing inflation to single-digits by the end of the year was reachable but "would be a tough game" and required disciplined monetary policy.
The central bank projects average inflation this year to
come in at 15%-19.5% and at 3%-5% next year, which is higher
than previously anticipated. "We don’t think policymakers will be willing to abandon the
tight monetary stance anytime soon. After all, core price
pressures are still very strong, wage growth has remained
elevated," Nicholas Farr at Capital Economics said in a note.
Economists polled by Reuters project the NBH to start
lowering interest rates sometime in the second quarter. However,
they have pared back bets on the scope of cuts in the base rate
to 175 bps by the end of the year from 250 bps seen last month.
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CEE rates Hungary's inflation strongest in over two decades ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Gergely Szakacs and Krisztina Than, graphics by
Jason Hovet in Prague; Editing by Sharon Singleton)
