It is Thursday, so the 1-week depo rate goes higher again

HUNGARY - In Brief 23 Dec 2021 by Istvan Racz
At today's regular 1-week deposit tender, the MNB set the fixed interest rate, at which it accepted unlimited bids as usual, at 3.8%, up 20 bps from last week's level. So far, this rate, which is the effective sterilisation rate , has been raised at each week's tender since the sterilisation rate was separated again from the base rate in late November. We have every reason to believe that another rate hike will also take place next week, and so it seems quite likely that the effective sterilisation rate ends this year at the 4% level.Somehow the market once again appeared to be a bit disappointed by the small size of today's rate hike, and so the forint weakened during the day. This was not the first occasion that the same thing happened. But even so, we find it quite certain that the MNB will not change its strategy: they are raising the deposit rate in small steps, and then they watch the impact on the forint. If they are not satisfied with the EURHUF reaction, as is the case now, they continue with another small rate hike in the following week.And that is why we expect another small rate hike next week.

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