“We think rates will be the least interesting part of the meeting, with the focus on what the MNB will announce for the end-of-Q1 3M depo cap,” said London-based research analyst Peter Attard Montalto. “With the policy framework still focused on liquidity and the front end of the curve, the base rate is immaterial and is likely to be kept unchanged in our view at 0.90%, as the MNB continues to tinker with liquidity,” he continued.
More interesting, the analyst argued, is the three-month deposit (the so-called 3M depo) cap.
“We think the key decision will be where the end-of-Q1 3M depo cap is set,” Montalto observed. “Our long-standing expectation was it could be lowered further to HUF 750 billion, and looking at the evidence we think that will still be the case. We will also watch for other hints on liquidity intervention next year, including more HIRS and duration swaps to shift liquidity out on the curve, though that can only come at the end of Q1. Rhetoric from the deputy governor in speeches or media interventions after the meeting will remain crucial,” he added.
Montalto concluded that, with credit lending growth still needing to increase to hit its target, and with CPI inflation broadly as expected and showing no real signs of pass-through from such a tight labor market, “the MNB will be happy to continue to loosen policy.”
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