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MNB policy-makers set HUF 500 bln limit on 3M depo for end of Q2

Telco

The Monetary Council of the National Bank of Hungary (MNB) set a HUF 500 billion limit on the stock of three-month deposits, the central bankʼs main sterilization instrument, by the end of the second quarter at its policy meeting Tuesday, according to Hungarian news agency MTI.

The Monetary Council had earlier set the limit for the three-month depo stock at HUF 750 bln for the end of Q2.

Policy-makers noted that banking sector liquidity is likely to decline at a faster rate in Q2 because of the maturity of swap contracts related to the conversion of retail FX loans into forints and the rollover of maturing FX government bonds in forints.

The MNB started placing quarterly caps on three-month depo tenders last fall in an effort to force more liquidity onto the market. The central bank has also been using one-month EUR/HUF swaps as another unconventional instrument for policy easing.

After the meeting on Tuesday, the rate-setters decided to extend the range of the swaps, adding six and 12-month facilities.

The three-month depo stock stands at HUF 800 bln at present, but HUF 400 bln of this will mature on March 29. On the same day, the MNB will offer another HUF 350 bln of depos at a tender.

The stock of EUR/HUF swaps stands at HUF 550 bln.

The Monetary Council will take a decision on the three-month depo limit to be set for the end of Q3 at a policy meeting in June.

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