No policy change, no surprise at all at today's Monetary Council meeting
At its regular monthly rate-setting meeting today, the Monetary Council concluded exactly as we predicted in our monthly report published yesterday. The market also remained fundamentally unsurprised by the decision.The Council kept all policies unchanged and issued a statement that sounded rather cautious as regards the potential for rising inflation later this year. The statement stressed the unusually high degree of uncertainty, and it said that the single biggest risk factor of the domestic inflationary outlook currently is the increased risk aversion on financial markets with regard to emerging markets. This can be translated as a worry about the forint exchange rate. The statement further stressed that the weekly setting of the 1-week deposit rate is intended to serve as a flexible tool to react to market sentiment.In other words, the key way to contain domestic inflation is seen by the Council in maintaining the forint's stability against the euro, its benchmark currency. This sounds very logical to us, especially as the current relatively elevated level of inflation was generated mainly by last year's HUF depreciation against the euro.The next rate-setting meeting will be held on March 23, when the Council also expects to discuss the Q1 inflation report. Based on current knowledge, we do not expect any significant change in the outlook and in policies on that occasion either.