The Monetary Council today: no policy change, eyebrows let just slightly lower

HUNGARY - In Brief 26 Feb 2019 by Istvan Racz

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It seems the Monetary Council does everything to provide the market with as little guidance as possible. There was once again no policy change announced after today's monthly rate-setting meeting, and they did care not to make any marked change in the language of the communiqué. In one little change compared the text released last month, the Council saw somewhat improved overall sentiment on global financial markets, and they dropped China's problems and the US government's forced break from their list of specifically mentioned risk factors. On the inflation indicator that really matters for them, they only said that it might go above the medium-term inflation target. But in case it does, it will be the key fact to determine MNB policies.Regarding actual measures, today's meeting is certainly no surprise to analysts. As to the communiqué, we would say that the Bank is most probably satisfied with the current EURHUF 317-318 rate, and it does not want to boost the forint in short term, especially as the most recent sovereign credit upgrades may provide some support to the HUF anyway. However, the fact remains that adjusted core inflation is trending upwards, and so we continue to expect some policy change, most likely a small upward correction of O/N deposit rate, to 0 to +10bps, at the March 26 meeting. At present, analysts seem split on the issue whether or not the MNB is likely to do anything in March. But the release of the February CPI data on March 8 may shift the existing balance of view by then, of course.