Sterilisation rate expected to fall by 100 bps to 16% tomorrow

HUNGARY - In Brief 19 Jun 2023 by Istvan Racz
The regular monthly rate-setting meeting of the Monetary Council is scheduled for tomorrow. This time around, the Council is also set to discuss the Q2 inflation report. Analysts unanimously expect another 100 bps reduction of the O/N deposit rate, which is the effective sterilisation rate. For December, Portfolio.hu's survey analysts expect the sterilisation rate to drop to 10-11.5%, with their median forecast currently standing at 10.5%. We are more cautious than that, expecting a 11-13% range, in which the sterilisation rate could end up by December. Of this, currently known facts would justify a cutback to 11%, restoring some positive real interest rate, which is a specifically announced intention of the MNB. The upper end of our range refers to various risk scenarios. Previously, we expected for long the unification of the sterilisation rate with the base rate by December, at the latter's current level at 13%. The reduction of our main forecast scenario is an acknowledgement of the fact that the economy is weaker than expected and that for price inflation is decelerating rapidly, given a rather positive turn in weather conditions in recent months.

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