The MNB are making another effort to chase money out of their balance sheet

HUNGARY - In Brief 03 Jun 2015 by Istvan Racz
No doubt, policy-makers at the central bank have been pushing the pedal hard in recent days. Just a few days following our previous post, which reacted to their base rate cut last week, they announced a reform of the MNB's monetary tools and mechanism yesterday, to take effect in three months from now - more accurately from September 22. As known from the screens, the MNB are going to switch from the use of the current 2-week deposit facility to a new 3-month deposit as the main sterilization instrument, starting from the above-mentioned date. The new facility will offer unlimited access to domestic banks and carry a fixed interest rate, set by the Monetary Council on September 22 for the first time, as the new base rate of the MNB. Simultaneously, the MNB will keep the 2-week deposit as well, but banks will not have unlimited access to the latter instrument any more. Instead, availability will be limited through periodical auctioning, and the total available amount will be narrowed gradually to HUF1000bn from the existing HUF5325bn (end-April data). The express aim of the change is exactly the same as it was on April 24, 2014 when the MNB announced the switch from their previous 2-week bonds to the current 2-week deposit instrument: to press money out of the central bank's balance sheet, with a view to more funds showing up as demand on the government bond market. With a big amount of excess liquidity existing in the system, monetary regulation has been all about sterilization for a very long time. Excess liquidity is due, of course, to high international reserves (EUR37bn at end-April), which is fed continuously by large current and capital account surpluses, and to ...

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2024 GlobalSource Partners. All rights reserved. This is prepared for GlobalSource Partners’ clients and may not be redistributed, reproduced, stored in a retrieval system, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of GlobalSource Partners. This is distributed simultaneously to our website and other portals used by GlobalSource Partners. The information herein was obtained from various sources and is believed to be reliable but GlobalSource Partners does not warrant its completeness or accuracy. Neither GlobalSource Partners nor any Country Analyst, officer or employee accepts any liability whatsoever for any direct, indirect or consequential damages or losses rising from any use of this or its contents.