No surprise at all from the MNB today

HUNGARY - In Brief 20 Dec 2022 by Istvan Racz
The Monetary Council left all policies unchanged today, in line with a strong analyst consensus expectation. Moreover, the Council made an attempt to say as little as possible, despite the fact that some basic statements had to be made on the Q4 inflation report, which they discussed today, and is due for publication on the day after tomorrow. The reason for this may be that EURHUF is just standing where it should from the MNB's perspective, and there is nothing the Bank's management wants less than any turmoil or even volatility during the upcoming holiday season. So the base rate remains at 13%, the O/N depo rate (the marginal sterilisation rate) at 18%, and the interest rate corridor at 12.5-25%. The MNB maintains all of its sterilisation and market regulation instruments, including the regular off-market sales of FX to domestic energy importers. On the latter, the Bank initially (back in October) expected the monthly FX need at €1.5bn, but now this looks less, as energy import prices have fallen substantially since then. On inflation, the Bank expects the December headline rate at 26-27% yoy, which is likely to stay for the whole of Q1. A more significant decrease of the headline rate is expected only in H2, not least due to base effects related to energy prices. By end-2023, the Bank sees a good chance for the headline rate to become high single-digit. Regarding prospects for monetary policy, the Council carefully refrained from emitting any signals to suggest that loosening may start relatively soon. High interest rates, including the 18% O/N rate, are needed for a relatively long time, and in this regard the key word they were using is patience. For interest rat...

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