Analysis: MNB to keep key rate on hold next week


In advance of the rate-setting meeting of the Monetary Council of the National Bank of Hungary (MNB) next Tuesday, analysts at Nomura said they expect the same policy to be held, although we should not lose sight of coming significant changes to the liquidity framework, to be announced in September and begun in October, an analysis sent to the BBJ today shows.

“We see rates remaining unchanged at 0.9% next week as the MNB sees no need to change base rates but discusses and prepares for the much bigger move towards a new liquidity framework, with the heavy lifting done by BUBOR and the MNB directing liquidity more actively,” the analysis says.  

Nomura expects the MNB to maintain a neutral stance on monetary conditions, pointing to low though rising CPI inflation, but to highlight the lack of demand pressures on inflation and the tempered growth recovery as reasons to maintain a wider monetary policy-loosening stance with these deeper changes to come.

“The shifts this year for the MNB have been a long time coming. The last major shift in policy was in December last year (another MNB attempt at lending growth), which was then implemented through Q1 with the LTRO facility, preferential deposit facility and final round of FGS [Funding for Growth Scheme],” the analysis recalls. “Since then we have had the ebb and flow of ongoing duration swaps in the background (which then trickled to nothing through Q2), as well as frequent verbal intervention from Deputy Governor [Márton] Nagy to massage markets. We outlined the new strategy a few weeks ago (the MNBʼs new strategy is extremely clever...), but have been awaiting full confirmation of its format at the September Monetary Council,” the analysis adds.

According to analysts at Nomura, the central bank is planning BUBOR trading 20 bps or so below base rates and is using the asymmetry in the band of rates around the base rate, as well as shifts in central bank facility access and new BUBOR rules (quote and volume requirements), to achieve this.

CIB Bank analysts said in a flash report at the end of July that the central bank is expected to keep its base rate intact for the rest of the year at 0.9%. The Monetary Council left its main policy rate unchanged at 0.9% at the end of July, a decision that was expected as the MC clearly signaled the end of its easing cycle in May, and this matched the unanimous market consensus.

Prospects of Hungarian Feed Industry Favorable This Year Crops

Prospects of Hungarian Feed Industry Favorable This Year

Hungary Opposes Freeing up Further EUR 6.5 bln From EPF Int’l Relations

Hungary Opposes Freeing up Further EUR 6.5 bln From EPF

1st Primark Store in Hungary Opens Retail

1st Primark Store in Hungary Opens

New Textile Collection Celebrates Hungary's Furmint Grape Wi... Art

New Textile Collection Celebrates Hungary's Furmint Grape Wi...


Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.