The sterilisation rate went up by 30 bps today, meeting expectation

HUNGARY - In Brief 28 Apr 2022 by Istvan Racz

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At today's tender, the MNB raised its fixed interest rate for 1-week deposits by 30 bps, to 6.45%. This was exactly the same as private sector analysts' median expectation, following the 100 bps increase in the base rate, to 5.4%, at Tuesday's Council meeting.These latest decisions were also an exact repetition of the March events, when the deposit rate was raised by the same 30 bps on the Thursday immediately following the monthly rate-setting meeting, at which the base rate was raised by 100 bps. True, the deposit rate, the instrument by which the MNB tends to react to market volatility, was raised by a total 155 bps between February 24 and March 10, when EURHUF was taken right to the 400 level for a short while on one occasion, in the immediate aftermath of Russia's initial military attack on Ukraine.It appears that for now, the MNB is indeed working towards unifying the base rate and the deposit rate, except for times of unduly high market volatility. It looks like the MNB regards the current market condition as normal, assessing the present forint trading around EURHUF 377-379 as being orderly. This is once again no surprise at all.In closely related news, the government cabinet decided to extend the existing administrative price controls on fuel and basic food items until end-June, with unchanged conditions. We strongly expect a further extension after that new date of expiry as well. Announcing the decision, cabinet minister Gulyás also said that the government sticks to its aim to meet the amended 4.9% of GDP fiscal deficit target, adding that they see no reason why the government should not be able to find agreement with the EU Commission on the rule-of-law pr...