The MNB met interest rate expectations today

HUNGARY - In Brief 22 Jun 2021 by Istvan Racz
Today, the MNB delivered on its promises:- They raised the base rate by 30 bps to 0.9%, the first hike for nearly ten years. This exactly met analyst expectation.- The 1-week deposit rate will go to 0.9% as well, meaning an effective rate hike of 15 bps. The base rate is becoming the effective sterilisation rate again. This also met analysts' median forecast (this time close to a consensus) exactly.- Interest rates on the O/N deposit rate and the one-week collateralised loan remain unchanged, at -0.05% and 1.85%, respectively. This means the interest rate corridor is becoming symmetrical again.- The Monetary Council's statement expressly said that the MNB is starting a new tightening cycle at this point.- The statement also said that the revision of interest rates will take place on a monthly basis, depending on the available data, and not on a quarterly basis, following the periodicity of the inflation report.- The MNB expects 4.1% average CPI-inflation for this year, and it does not expect CPI-inflation to fall below 4% at any time before next year. In other words, it expects inflation to stay above the Bank's tolerance ceiling for the rest of 2021.- On quantitative easing, the statement also says that reaching HUF 3000bn in total allocations, the MNB will close down its NHP Hajrá! program, the one in which it has allocated refinancing so far to HUF 2800bn of bank loans to some 39 thousand SMEs at zero cost. (Outstanding loans under this program were at HUF 1880bn at end-May.) The Bank will introduce instead new facilities to promote the financing of environmental sustainability, in line with a new legal mandate on environmental policy the MNB is going to get from Au...

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