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MNB: Banking sector liquidity narrows in January

The forint liquidity of Hungaryʼs banking sector fell in January from the previous month, as evidenced by a drop in the combined stock of the National Bank of Hungaryʼs (MNB) sterilization instruments, according to data released by the central bank today.

Average monthly stock of the three-month central bank deposit, introduced as the main sterilization instrument in the autumn of 2015, rose by HUF 68.2 billion in January to HUF 3.016 trillion at the end of the month. At the same time, stock of the two-week deposit instrument, which the MNB plans to phase out by April, fell by HUF 293.4 bln to HUF 951.5 bln.

Following a sharp HUF 302.9 bln fall in December, average central government deposits dropped even more: by HUF 483.4 bln in January to HUF 1.139 tln, to their lowest average level recorded since the end of 2014. The MNB said the January drop reflected the impact of the big year-end fall of the deposits.

End-of-month figures show that the central government deposits rose HUF 835.9 bln in January to reach HUF 1.496 tln by the end of January, indicating that the deposits were refilled to the lower end of their usual levels after a HUF 1.407 tln plunge between the end of November and December. While forint and FX deposits dropped relatively evenly in December, nearly all – HUF 771.8 bln – of the January increase was in forint deposits as no FX issues followed the big FX expiry dates in December.

Central government deposits regularly fall by year-end as the government debt manager tends to reduce them in a bid to keep gross state debt, as required by both the EU and Hungaryʼs constitution, on a falling trend.