Analysts expect no change in MNB interest rates tomorrow

HUNGARY - In Brief 19 Dec 2022 by Istvan Racz
The Monetary Council is scheduled to hold its last regular rate-setting meeting tomorrow. According to Portfolio.hu's poll, analyst are unanimously betting on no change in interest rates - the 18% O/N depo, the 13% base rate, and the 12.5-25% interest rate corridor. (For sure, the O/N depo rate is not to be decided on by the Council in the formal sense, but it is nevertheless clear to everyone that setting that one is practically the single most important decision the Council is to convey to the Bank's management, i.e. essentially the same people who predominantly set the tone in the Council). We could not agree more: MNB interest rate policy remains a function of the EURHUF exchange rate, which is currently behaving itself quite nicely, having retreated to the 400-405 range, that is exactly where it should be from the MNB's perspective. However, it is important to remember that the Council is set to discuss the Q4 inflation report and may send out messages on the basis of that debate tomorrow. There seem to be mixed expectations regarding the latter on the market currently. As for us, we would not be surprised if the Council (realistically) remained very cautious about prospects for H1 next year, expecting any significant decrease of inflation only for H2. Interest rate policy should follow this outlook quite strictly, except the handling of short-term market volatility of course.

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