ANALYST VIEW - Hungary cenbank increases HUF liquidity injections further

Portfolio
Hungary’s central bank (NBH) has allotted 200 billion forints worth of 1-month FX swaps providing HUF on its tender on Monday, replacing HUF 150 bn maturing in the same tenor. Citigroup analyst Eszter Gárgyán said the bank is unlikely to be under pressure to tighten liquidity conditions, and likely to aim to keep rates via liquidity management until at least late 2018.
Liquidity injections have increased by HUF 50 bn as a result of Monday’s swap tender, reaching altogether HUF 650 bn in 1M, 3M and 6M FX swaps.

Click to enlarge
The NBH has communicated that it will continue to rely on FX swaps to anchor the front end of the yield curve, which provides a flexible tool to manage liquidity conditions. The MPC already decided in March about the extension of FX swap tenors to 12 months, Gárgyán said in a research note on Tuesday.

She noted that this tenor has not been auctioned yet but “is an indication of the NBH’s effort to anchor forward BUBOR expectations and we believe there may be even longer tenors added, if needed."

Click to enlarge

The recent drop in oil prices, soft CPI surprises and potential regulative price cuts (VAT and/or utility prices) may create room for the NBH to maintain its current dovish stance in the next 6-8 quarters.

Recently, monetary policy communication has increasingly put emphasis on not just keeping the policy rate unchanged (at 0.90%) but also maintaining the current loose stance of monetary conditions, Gárgyán added.

“Given the low FX pass through to CPI, the NBH’s tolerance towards weaker FX and Hungary’s large structural trade surplus, the NBH is unlikely to be under pressure to tighten liquidity conditions and will likely target to keep interbank rates at current compressed levels via liquidity management until at least late 2018."

 

More in Economy

July 10, 2025 12:05

Price of petrol to be raised in Hungary

Diesel price to remain on hold

July 10, 2025 10:48

Hungarian government introduces new measures against shrinkflation

Warnings must be displayed

építészet-épület-idegenforgalom-műemlék-turizmus-város parlament budapest magyar remény
July 10, 2025 09:45

Hungary in mounting trouble: debt-to-GDP ratio might not be reduced this year

And the market may mete out punishment for this

dolgozo
July 09, 2025 16:00

Hungarian government reacts to the increase in the number of foreign workers

Why are there more of them? Because there are fewer of them.

Car factory-autógyár-automatizálás-dolgozó-gyártás-gyártócsarnok-ipar-járműgyártás-karosszéria-robotika-technológia
July 09, 2025 09:40

Hungarians keep getting the boot, while foreign workers are being recruited en masse

Why are there more and more foreign workers in Hungary?

LATEST NEWS

Detailed search