MNB took no measure today, softened macro forecast only by little

HUNGARY - In Brief 15 Dec 2015 by Istvan Racz

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Today's Monetary Council meeting brought about to no measure at all, whether conventional or unconventional. The base rate remains at 1.35%. In its new inflation report, the Bank left its average inflation forecast for this year unchanged at 0% and revised the 2016 forecast moderately down, to 1.7% from 1.9%. Besides, the MNB now expects 3% GDP growth for this year, down from September's 3.2% forecast but meaning it still expects a pick-up in Q4. For 2016, its GDP forecast for 2016 remains an unchanged 2.5%. There was no remark whatsoever from the Council or the MNB staff that a central bank policy different from their previous assumptions would now underly their new macro forecast. This outcome of today's meeting seems very logical, though it may be surprising for those who believed all the talk that came from the MNB in recent weeks. Indeed, the bank was actively stressing its easing bias and hinting that new unconventional measures, aimed at reducing long-term government bond yields may come from them already in December. But on the other hand, today's meeting was held just ahead of a crucial FED decision, and it certainly seems wise to wait and see on such occasions. Besides, the forint weakened quite a bit (roughly 2%) over the past week or so in HUFEUR terms, in a great part because they managed to talk it down themselves. Now, at EURHUF 317-318, it is kind of OK, as the average EURHUF is coming out to about 310 in 2015 (roughly 0.3% weakening from 2014, so largely an inflation-neutral exchange rate), as HUF weakening of 2-3% against 1-2% CPI-inflation in 2016 would fit to the moderately growth-supporting MNB policy which they are hinting at by their vague refere...