The MNB loosened policy slightly further today

HUNGARY - In Brief 17 Dec 2019 by Istvan Racz
Today's monthly rate-setting Monetary Council did not do a lot really, except for stating that they see inflation risk symmetrical now, instead of downwardly biased as so far, and also apart from raising the maximum exposure in their corporate bond purchasing program from HUF 300bn to HUF 450bn from January. This amounts to a further marginal loosening in our view, as:- they explained the revision of their risk outlook by making reference to reduced recessionary prospects for the Euro Area, without any practical consequence on domestic policy; and as- even though the MNB has undertaken the sterilisation of the extra liquidity generated by its bond purchases through what they call preferential deposits, that liquidity will remain there rather than being destroyed.In our view, the message of this decision is that the Council is perfectly happy with:- the current inflation prospect, i.e. the headline rate moving to 4% yoy in January, although on a temporary basis only, and adjusted core inflation at 3.5-3.7% yoy for the coming few months; and also with- the current broad trading range of the forint between EURHUF 329-337, which also means satisfaction with the forint's slow and moderate-pace depreciation against the euro.

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