Gov't to Lift Cap on Deposit Rates From April 1

Analysis

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The government will phase out a cap on deposit rates from April 1, the National Economy Ministry said on Thursday.

The cap, set at the average three-month discount T-bill auction yield, was rolled out on November 22, 2022, as a measure to counter interest income of a scale that was "unjustified and unfair". The cap was applied to institutional investors, pension funds, insurers, and investment funds, as well as retail banking clients with HUF 20 mln or more on their accounts.

The ministry noted that the effective central bank base rate and interbank interest rates had fallen close to ten percentage points since the cap was introduced, as inflation dropped sharply supported by government measures.

The average yield at the last auction of three-month T-bills, on Tuesday, was 6.61%. The three-month Bubor stood at 8.03% on Wednesday.

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