Some unnecessary excitement about MNB policy yesterday

HUNGARY - In Brief 15 Jun 2021 by Istvan Racz

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Perhaps the MNB should consider to stop talking publicly for at least a week ahead of critical Monetary Council meetings, when public attention is focused heavily on each and every word they say. That could lessen the risk of potential damage if the market is unable to read various statements coming out of the Bank.Yesterday, the forint weakened on a statement made by Gyula Pleschinger, member of the Monetary Council, who was reported by Bloomberg as saying that the MNB is considering to phase out the 1-week deposit instrument, and that the Bank's interest rate decisions could take place at quarterly intervals, following the periodicity of the inflation report. This would not make much sense, of course, especially the phasing out of the Bank's main sterilization instrument, in which HUF 4939bn was of liquidity was sitting at end-May. Later in the day, he said that his words were misunderstood: he had not said that the 1-week deposit facility should or would be discontinued, and his remark on the potential periodicity of interest rate decisions reflected only his personal view. Regarding the 1-week deposit, it was his actual view that it could make sense to eliminate the difference between the 1-week deposit rate and the Bank's base rate at this point.A few days ago, talking about the Bank's new stability report, a high-ranking staff member said that maintaining the NHP Hajrá! refinancing program in its current form would not make sense anymore, and so the MNB is considering to discontinue that facility. He did not say exactly what would replace NHP Hajrá!, a program under which banks have extended loans to domestic SMEs with an outstanding amount of HUF 1880bn at end-M...