Expect an unchanged sterilisation rate at tomorrow's deposit tender

HUNGARY - In Brief 20 Apr 2022 by Istvan Racz
Given the forint's recent appreciation to EURHUF 371, with which we believe the MNB must be perfectly satisfied, investors should not expect any further increase of the 1-week deposit rate, the effective sterilisation rate, from its latest 6.15% level tomorrow.Going forward, the next event to follow will be the regular monthly Monetary Council rate-setting meeting next Tuesday (April 26). We expect a 50 bps increase in the base rate from the existing 4.4%, as the MNB has said it would send the base rate after the sterilisation rate, with a view to eventually unifying the two rates again.This would move up the interest rate corridor by 50 bps as well, to 4.9% as regards the lower end, and to 7.9% at the higher end, which also serves as an effective ceiling for the 1-week deposit rate.Based on currently known conditions, we expect more measured / less frequent increases in the sterilisation rate in the rest of 2022, with the end-year level at 7.5%. This goes together with the expectation of 8.5% yoy CPI-inflation in December. Administrative price controls will most likely stay in force, and represent a key condition for our inflation forecast to materialise.

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