Today's rate-setting meeting was almost a non-event

HUNGARY - In Brief 23 Jul 2019 by Istvan Racz

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The Monetary Council made sure that today's monthly rate-setting meeting became genuinely uninteresting, but that was fully in line with everyone's expectation. The Council did not take any action on this occasion, and its statement became slightly more relaxed than a month ago.The statement took note of the moderate decrease of CPI-inflation and core inflation in June, greeted the recent news on the tightening of fiscal policy in 2020, noted the most recent deceleration of nominal wage growth, and suggested that MÁP+, the Treasury's new retail bond could lead to a higher household savings ratio. It dropped a previous reference to a likely mild further increase in adjusted core inflation (ACI) over the next few month, and only said that ACI will likely start to decrease progressively towards 3% from late 2019. In another small change from June's text, the statement mentioned the possible change of course of FED and ECB policy, in the direction of loosening.On other subjects, the MNB said they formally started their HUF300bn corporate bond-buying program in July, the first issues probably occurring in Q4 2019, and that contracts under their fixed-interest loan programs to SMEs, started in January, reached a total HUF175bn in H1.All this implies some verbal backtracking from their very moderate recent tightening course, even though the target to reduce non-sterilised liquidity in the banking sector by HUF100bn in Q3, the only measure in the tightening direction taken by late June's meeting, remains intact.