Hungary maintains policy despite uptick in inflation

Bloomberg

Hungary’s central bank kept its monetary policy unchanged despite an uptick in inflation and a weakening forint, pledging to review its setup in June when its updated forecasts are due.
Central bankers, who held the benchmark rate at 0.9 percent and the overnight deposit rate at minus 0.05 percent, said financing costs would remain favourable but a cautious approach to policy was warranted.
One of Europe’s most dovish monetary authorities is biding its time to assess what it sees as two-sided risks to the inflation outlook: a domestic economy that’s firing on all cylinders and a global environment facing a slowdown.
“Persistently buoyant domestic demand is boosting, and weakening external activity is restraining the pace of price increases,” the central bank said in the statement.
With oil prices rising, the forint hitting an eight-month low against the euro, and core inflation quickening, some analysts say there’s need for more tightening after a one-time adjustment to money-market rates in March.
“The external environment still isn’t putting tightening pressure on the central bank,” said Zoltan Varga, an analyst at the Budapest-based Equilor brokerage. With the forint weakening in recent weeks, domestic inflation developments will be key for the policy outlook, he said.