No change is likely at tomorrow's Monetary Council meeting

HUNGARY - In Brief 26 Mar 2018 by Istvan Racz

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The market expects absolutely no policy change at tomorrow's rate-setting meeting, either through interest rates or in the area of non-conventional policies. This corresponds to our view, which is based on two circumstances. First, the MNB may not want to take any significant action immediately before the election (it would not look very elegant), and second, there does not seem to be any significant pressure for them to act right now. From where the MNB is looking, domestic economic conditions seem to be close to optimal, and the ongoing global market turmoil has left Hungary pretty much untouched so far.Of course, the Bank may come forward with a new quarterly (Q2) target for MIRS sales, most likely moderately up from the HUF300bn set for Q1, and it may make some comments on mortgage bond purchases. (Today, it bought new FHB mortgage bonds for 5 and 10 years at an auction. The bonds were sold out at 10 bps below government bonds for five years and at 21bps below government bonds for 10 years, clearly as a result of MNB intervention on this market.) The Bank is also expected to publish its quarterly macro forecast, probably setting its GDP forecast slightly higher than the 3.9% predicted three months ago, and the average CPI -inflation forecast at slightly below December's 2.5% projection, both for this year of course. At least, this is what analysts are saying, and we tend to agree with this view.By the way, nothing really new has happened on the election front recently. Polls remain roughly unchanged, and opposition parties have failed to strike any breakthrough cooperation deal. On the leftist-liberal side, there have been some gestures made in the form of one or t...