December 19, 2017 / 1:07 PM / a year ago

UPDATE 1-Hungarian central bank keeps rates unchanged, mortgage bond buying in focus

(Updates with forint, analyst comment, background)

* Bank leaves base rate at 0.9 pct as expected

* Overnight deposit and lending rates also unchanged

* Bank will buy mortgage bonds from 2018

* Bank in easing mode, does not worry about inflation

* To release new inflation forecasts at 1400 GMT

By Krisztina Than and Gergely Szakacs

BUDAPEST, Dec 19 (Reuters) - Hungary’s central bank left all its main interest rates unchanged at record lows on Tuesday, keeping its unconventional stimulus programmes aimed at curbing long-term interest rates.

The bank announced last month that it would start buying mortgage bonds from 2018. It wants to push yields lower on longer-dated government bonds and encourage borrowers to choose fixed-rate housing loans.

Run by a strong ally of rightist Prime Minister Viktor Orban, the bank wants to drive borrowing costs lower — even as global central banks and the nearby Czech central bank have started tightening.

The decision to keep the base rate at 0.9 percent was in line with the unanimous forecast of 18 analysts in a Reuters poll last week.

Analysts also expected the bank’s overnight deposit rate, the lower threshold of interbank rates, to remain at -0.15 percent at the meeting.

Most analysts do not see a change in the base rate until at least 2020.

After Tuesday’s meeting, the central bank will release its fresh inflation and economic growth forecasts.

It is also expected to offer more operational details of its mortgage bond programme and new interest rate swaps (IRS) announced last month, which investors will watch closely.

The forint traded at 313.18 after the bank’s meeting, unchanged from levels before the announcement.

The bank is bucking a global tendency of raising interest rates, without worrying about inflation, which picked up to 2.5 percent in November from 2.2 percent in October.

It is still below the bank’s 3 percent target, which has a 1 percentage point tolerance range on either side.

“We believe in the lack of further wage acceleration ...or external price shocks, inflation is likely to remain below the 4 percent upper band of the NBH’s target even in 2019, allowing policy makers to stick to their ultra-dovish stance until the ECB begins to hike rates,” Citibank analyst Eszter Gargyan said in a recent note.

Reporting by Krisztina Than; Editing by Jeremy Gaunt

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