Monetary Council meeting: (almost) exactly as expected

HUNGARY - In Brief 27 Mar 2018 by Istvan Racz

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Today's Monetary Council meeting has brought about to no change in the MNB's interest rates, the access to the 3-month deposit, non-conventional policies and inflation forecast. Regarding the latter, the Bank expects 2.5% average CPI-inflation this year, 2.9% in 2019, and 3% in 2020, also predicting that the 3% inflation target will be reached in a sustainable way by mid-2019. This inflation forecast, unchanged from December, is thought by the Bank to be consistent with the continuation of its current policies.The little novelty from the meeting was an increase in the Bank's GDP growth forecast to 4.2% for this year (3.9% was expected in the December forecast) and to 3.3% (previously: 3.2%) for 2019, whereas for 2020, the MNB still expects 2.7% growth. In addition, the Bank expects the current account surplus to fall below 2% of GDP from the historical peak of 6%, reached in 2016, yet to remain positive in the longer term. Finally, the Council has set the Bank's MIRS quota at HUF600bn for H1 this year, meaning the intention to sell HUF300bn worth of new interest rate swap contracts in Q2.All this has pretty much met analysts' expectations, except that the MNB was expected to reduce its inflation forecast slightly, and to set a somewhat higher MIRS quota for Q2.