Policymakers raise O/N depo, collateralized loan rates

MNB

Image by Jessica Fejos

The Monetary Council of the National Bank of Hungary (MNB) decided to raise the central bank's O/N deposit rate by 45 bp to 1.6% and the O/N and one-week collateralized loan rates by 105 bp to 4.1% at a meeting on Tuesday, according to a report by state news wire MTI.

No change was made to the base rate which stands at 2.1%.

The O/N deposit rate and the collateralized loan rate mark the bottom and the top, respectively, of the central bank's "interest rate corridor". The base rate is paid on mandatory reserves and preferential deposits.

In a statement released after the meeting, the council said it did not discuss changing the base rate on Tuesday, in line with the agenda of the meeting; however, it did decide to widen the interest rate corridor and make it asymmetrical.

The O/N depo rate is now 50 bp under the base rate, while the O/N and one-week collateralized loan rates are 200 bp over the base rate.

The council noted that it had indicated after its monthly policy meeting on November 16 that MNB intended to respond to a recent increase in short-term risks in financial and commodity markets "quickly and to the extent necessary".

It pointed out that the central bank's one-week depo rate has risen above the base rate in recent weeks and said widening and setting the interest rate corridor asymmetrically upwards "is an integral part of the strategy of the new phase of monetary policy".

"In order to achieve and maintain price stability, it is highly important that the central bank has the appropriate monetary policy room for maneuver. This ensures the effective management of risks arising from the rapidly changing environment," the council said.

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