No policy change is likely at tomorrow's rate-setting meeting

HUNGARY - In Brief 29 Apr 2019 by Istvan Racz

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Following a relatively long Easter recess, during which nothing much happened in Hungary, except for the political theatre preceding the late May European election, economic decision-making is to become more active again. Tomorrow (on April 30), the Monetary Council's monthly rate-setting meeting will be due, and the publication of the government's annual convergence report, their most important policy document apart from the annual budget, is also expected. (This report is to be presented to the EU Commission by end-April each year.) On this occasion, no policy change is likely from the MNB for three reasons:1. At its late March rate-setting meeting, the Council laid down a rather clear schedule for further decision-making, setting a plan to reduce FX swaps by HUF130bn, and to cut non-sterilised excess liquidity by HUF100bn on average, in Q2, in addition to returning to the review of interest rates only in late-June, when the Q2 inflation report is to be discussed. Changing this plan in only a month's time would suggest that something has gone wrong, with a likely unfavourable impact on expectations;2. It is not very probable that the MNB would steal public attention from the government's convergence report on the very day when the latter is due to go public. At most, the Council could say something meaningful about their credit-side policies, like the refinancing loans helping SMEs or their most recently announced program to buy local corporate bonds. These instruments have much more to do with credit policy than with monetary policy, and so any announcement regarding them could sound as one of the MNB's usual gestures of sympathy towards the government's efforts to ...