Hungary Seeks Price Clarity as Rates on Hold: Decision Day Guide

(Bloomberg) -- Hungary’s central bank is set to keep its monetary-policy mix unchanged after a “very mild” tightening step in June, as interest-rate setters await more clarity on the inflation outlook.

With the U.S. Federal Reserve primed to cut rates this month, policy makers in Budapest are holding fire as inflation slows toward their target. They’re trying to assess the balance of domestic price pressures from a tight labor market versus the impact of a global economic slowdown and dovish monetary.

The Monetary Council will keep the overnight deposit rate unchanged at minus 0.05%, and the benchmark rate at 0.9% Tuesday, according to a Bloomberg survey. Last month, it cut the target for excess liquidity in the economy by 100 billion forint for the third quarter, adjusting an unconventional toolkit they’ve relied on to steer short-term borrowing costs.

“The National Bank of Hungary skipped the opportunity to add any forward guidance to its statement in June and we don’t see any reason why it should add one now,” said ING analyst Peter Virovacz. “The latest developments all support the wait-and-see stance.”

Of late, rate setters have adjusted financing conditions only every three months as updated economic forecasts come through. The next inflation report is due in September.

Last month, inflation slowed to an annual 3.4% from 3.9%, moving back toward the 3% goal. A narrowing budget deficit and high demand for a high-yielding retail bond may also influence the policy outlook.

The central bank will announce its rate decision at 2 p.m., followed by a statement an hour later.

To contact the reporter on this story: Marton Eder in Budapest at meder4@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Michael Winfrey, Andrea Dudik

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