Press release on the Monetary Council meeting of 20 October 2015 | MNB.hu
Central bank: mnb | Type: statement | Date: 2015-10-20

20 October 2015
At its meeting on 20 October 2015, the Monetary
Council reviewed the latest economic and financial developments and voted to
leave the central bank base rate unchanged at 1.35%.
the Council’s assessment, Hungarian economic growth is likely to continue.
While the pace of economic activity is strengthening,
there continues to be a degree of unused capacity in
the economy, and therefore
the domestic real economic
environment continues to have a disinflationary impact. Inflation remains substantially
below the Bank’s target.
prices fell in September 2015. Core inflation was broadly unchanged. The Bank’s
measures of underlying inflation indicate moderate inflationary pressures in
the economy. Core inflation is likely to rise gradually as a result of an
expansion in domestic demand and rises in wages, but the persistently low cost
environment contains the increase in consumer prices. The stabilisation of
inflation expectations around the target is likely to support that price and
wage-setting will be consistent with the inflation target over the medium term
as the output gap closes.
is expected to move to positive territory in the coming months, but to remain
substantially below the 3 per cent target, and is only likely to rise to levels
around 3 per cent at the end of the forecast horizon.
Domestic economic growth continued in
the second quarter of 2015. Based on the monthly macroeconomic indicators,
underlying growth did not change significantly. Industrial production rose in
August 2015 relative to a year earlier. The dynamics of retail sales have been
stable in recent months, with their volume increasing across a wide range of
products. Employment rose further while the unemployment rate was unchanged as
activity increased. Domestic demand is making an increasing contribution to economic
growth. Government investment is likely to fall as funding from the EU declines
considerably, the impact of which is expected to be mitigated by the gradual
pick-up in private sector investment. Domestic economic growth is likely to
continue, in line with the latest Inflation Report projection.
in global financial markets has been volatile over the period since the
Council’s latest policy decision, but this has had little impact on domestic
indicators.
During the
first half of the period,
uncertainty about the interest rate
increase by the Fed and concerns over growth prospects in emerging economies
had a negative impact on global appetite for risk. Global financial market environment
improved in the second half of the period as market expectations of the Fed’s interest
rate increase were postponed.
financial markets were relatively calm in the period, with the forint
appreciating slightly against the euro. The domestic CDS spread and long-term
government bond yields have decreased since the
previous policy decision. Market
expectations have moved in line with the Bank’s forward guidance announced in
September and are consistent with maintaining the base rate unchanged over the
entire forecast horizon.
Hungary’s persistently strong
external financing capacity and the resulting decline in external debt are
contributing to the reduction in its vulnerability. In the Council’s
assessment, a cautious approach to monetary policy is still warranted due to
uncertainty in the global financial environment.
assessment
, there continues to be a degree of unused capacity in
the economy. Inflationary pressures are likely to remain moderate
while the negative output gap is expected to close only gradually over the
policy horizon. If the assumptions underlying the Bank’s projections hold, the
current level of the base rate and maintaining loose monetary conditions for an
extended period, over the entire forecast horizon, are consistent with the
medium-term achievement of the inflation target and a corresponding degree of
support to the economy.
The abridged
minutes of today’s Council meeting will be published at 2 p.m. on 4 November
Monetary Council