Level of interest rates in the light of the changing interest rate policy in Hungary between 1924 and 2015 – How did the central bank base rate get to its historic low levels?

This paper examines Hungary’s interest rate policy between 1924 and 2015 with special regard to the role and effects of the central bank base rate. It introduces the changes in the economic environment – with special focus on inflation – characterising the period, and takes account of the main steps relating to the interest rate policy and central bank instruments used since the foundation of the Magyar Nemzeti Bank in 1924, within the framework of the monetary policy of the given period, differentiating three separate eras. The aim of the paper is to point out how central bank interest rates gained greater and greater importance in the anti-inflationary policy of the central bank on the basis of interest rate policy analysis in an adequate conceptual framework and to historically place the 1.35 per cent base rate level currently in effect since the end of the interest rate reduction cycle, which was commenced by the central bank in August 2012.