* More cuts could trigger unintended consequences -cbankers
* Loose policy framework to prevail at least until end-2017
* To accept up to HUF 400 bln of 3mo deposits at Dec tender
(Adds detail, more comments)
BUDAPEST, Nov 29 Any further cuts in Hungary's
0.9 percent base rate could lead to unintended
consequences, the central bank said on Tuesday, adding that
unconventional tools to manage banking system liquidity were
more efficient at this stage.
The National Bank of Hungary (NBH) kept the base rate
unchanged at a monthly policy meeting last week but cut its
overnight lending rate for the second month in a row.
That reduction followed weaker-than-expected third-quarter
growth and was consistent with the central bank's aims of
increasing liquidity in interbank markets and keeping borrowing
costs low for businesses and households.
Deputy Governor Marton Nagy and Managing Director Barnabas
Virag said in Tuesday's paper that the central bank's loose
monetary policy framework can prevail at least until the end of
next year, or even into 2018 or 2019.
"In the current situation, unconventional tools to channel
banking system liquidity can contribute to reaching the
objectives of the NBH more efficiently than lowering the base
rate," the central bankers said.
The importance of the base rate as a benchmark has declined
as the central bank has started to limit the amount of funds
commercial banks can keep in its three-month deposits.
It aims to cut the volume of deposits to about 900 billion
forints ($3.07 billion) by the end of this year and will decide
on the desired end-of-March level of the three-month facility at
its upcoming policy meeting on Dec. 20.
As part of those efforts, the central bank said it would
accept up to 400 billion forints of three-month deposits at the
next tender of the facility in December, in line with last
week's accepted amount.
The bank said its revamped monetary policy framework has
helped reduce interbank rates by 45 basis points to 0.57 percent
over three months, while the yield on three-month
Treasury bills fell by 47 basis points to below 0.3 percent.
It said a narrowing of the interest rate corridor
implemented over the past months would further loosen monetary
conditions and reduce the volatility of shorter interbank rates.
Last week the bank cut the collateralised loan rate by 15
basis points to 0.9 percent, having lowered the rate by 10 basis
points in October. It left the overnight deposit rate on hold at
($1 = 293.24 forints)
(Reporting by Gergely Szakacs; Editing by Catherine Evans)