Another interest rate step from the MNB: the corridor was raised today

HUNGARY - In Brief 30 Nov 2021 by Istvan Racz

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In a brief statement today, the MNB said that at today's meeting, which was not one of its monthly rate-setting meetings by the way, the Monetary Council raised the interest rate corridor significantly and made it asymmetrical. The base rate was left unchanged at 2.1%.The new corridor looks like 1.6% (up 45 bps, 50 bps below the base rate) for the O/N deposit rate on the lower side, and 4.1% (up 105 bps, 200 bps above the base rate) for the O/N and 1-week collateralised loan (effectively repo) rate on the upper side.There were no signs that this decision was coming immediately, but it is rather logical that they raised the short-term MNB loan rates, as the 3.05% existing loan rate had set an effective upside limit to the 1-week deposit rate, which was raised to 2.9% last Thursday. Leaving it unchanged today would have implied that no 1-week deposit rate hike bigger than 15 bps would have been possible later this week (on Thursday, more concretely). Assuring the market in advance that the effective sterilisation rate will not be raised by any significant amount, by not raising the 1-week loan rate, would certainly run counter to the MNB's existing policy of systematic tightening. But of course, the higher loan rate means no guarantee that the 12-week deposit rate would be raised further already this week.