Absolutely no surprise at today's Monetary Council meeting

HUNGARY - In Brief 22 Nov 2022 by Istvan Racz

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As we wrote yesterday, the regular monthly rate-setting meeting today was not expected to lead to any policy change, as the existing mix appears to be working fine for now. The Council exactly met this expectation, leaving the base rate at 13%, the interest rate corridor at 12.5-25%, and saying particularly nothing on the 18% O/N deposit rate. (The very strong implicit suggestion, we think, was that the 18% deposit rate will also stay for now.) Following the meeting, vice governor Virág spoke in one of his usual press conferences, officially called as a "background conversation". He said the following:- The policy mix set up on October 14 still works fine, the Council sees no need to change for now.- The O/N deposit tender instrument will be kept working as long as required to maintain market stability. The Council will look at six main factors to see when the instruments introduced in mid-October can be discontinued or the currently applied interest spread (over the base rate) can be reduced: the energy situation, the impact of the war, investors' mood, leading central banks' actions, the current account situation and talks on access to EU funds. At this moment, risks are high in all of these respects.- There will be another tender held to invite 2-month deposits towards end-November. (This will most probably result in much higher interest rates than last time, we would add, as no one will likely think that the O/N rate will fall below the latest tenders' 14-14.5% range during the short tenor of those deposits. Thus, the tenders are likely to qualify as a genuine tightening step.)- In addition, the Bank will issue short-term discount bonds again towards the turn of th...