Monetary policy instruments

The primary objective of the Magyar Nemzeti Bank is to achieve and maintain price stability. Without prejudice to its primary objective, the MNB supports the maintenance of the stability of the financial intermediary system, the enhancement of its resilience, and its sustainable contribution to economic growth; furthermore, the MNB supports the government’s economic policy and its policy related to environmental sustainability, using the instruments at its disposal.

Monetary policy instruments are instruments used by the Bank in the day-to-day conduct of monetary policy. In designing and operating its policy instruments, the MNB aims to ensure that the toolkit used supports the conduct of monetary policy, and in particular the Bank’s interest rate policy. The operational objective of the monetary policy instruments is to ensure that the relevant short-term market yields are aligned with the Bank’s policy rate and the related expectations.

The range of instruments that the Bank can use is set out in Act CXXXIX of 2013 on the Magyar Nemzeti Bank. The Monetary Council decides on the use of monetary policy instruments and the underlying strategy. Information on the monetary policy instruments and the terms and conditions of each instrument are set out in the relevant MNB decrees in the case of required reserves, in the information sheet and the public offer in the case of the discount bill, and in the document entitled Terms and Conditions of the Operations of the Central Bank in Forint and Foreign Currency Markets and in Notices in the case of other instruments.

Based on the Monetary Council’s decision the MNB’s main policy instrument is the required reserves. Credit institutions operating in Hungary are obligated to maintain required reserves with the Bank, corresponding to a certain percentage of their liabilities, on which the MNB pays interest.