Base rate to 'converge' with 1 wk depo rate

MNB

Image by Jessica Fejos

The base rate of the National Bank of Hungary (MNB) will rise to the rate the central bank pays on its one-week deposit facility in 2022, the minutes from a monthly policy meeting in December show, according to a report by state news wire MTI.

"Members [of the Monetary Council] underlined that it was key for the measures affecting the one-week deposit rate to be implemented persistently in the Bank's cycle of base rate hikes. In order to ensure this, the base rate would converge with and reach again the level of the one-week deposit rate in 2022," the minutes released on Wednesday show.

The one-week depo rate moved in tandem with the base rate from June until November, when the council decided MNB must be allowed to be set it over the base rate to respond to an increase in short-term risks in financial and commodity markets "quickly and flexibly".

After their policy meeting on December 14, the council said that changes to the central bank's one-week deposit facility "will feed into the [MNB]'s tightening cycle for a sustained period".

The minutes show the rate-setters voted unanimously at the meeting to raise the base rate by 30 bp to 2.4%.

The one-week depo rate has been raised every week since the December meeting and stood at 4% on December 30.

The minutes confirmed the importance of anchoring inflation expectations in line with the central bank target and pointed out that, "in the decision-makers' view, a predictable and credible cycle of base rate hikes was the most effective instrument" to achieve this.

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