The Monetary Council of the National Bank of Hungary (MNB) has on Tuesday raised the overnight deposit rate by 10 basis points, taking the lower end of the interest rate corridor higher for the first time since December 2011. As a result, the O/N depo rate is going to be -0.05% as of Wednesday.
Market players were divided whether or not the O/N deposit rate will be altered today. The 0.9% base rate (said to be the benchmark) and the O/N lending rate were both left on hold as expected.
The MPC is set to release its post-meeting statement a 3 P.M. today, and we’ll be able to learn more about the background of today’s decision at a press conference to be held jointly by MNB Governor György Matolcsy and two Deputy Governors Márton Nagy and László Windisch which is also starting in an hour.
We should keep a close eye on whether or not the MNB will reduce the stock of outstanding FX swaps from the current cc. HUF 2,000 billion come next quarter, lowering the volume of liquidity that needs to be crowded out from the interbank market.
The last time the Monetary Council of the MNB tightened monetary conditions was in December 2011, when - copying its November policy meeting - it raised the base rate by 50 basis points.
So, there has been no monetary tightening in Hungary since the last month of 2011. The MNB has been easing monetary conditions practically ever since (either via conventional or unconventional tools), but this 10bp hike is a sharp turn.
The analysts polled by Portfolio were split on whether or not the MNB will raise the O/N depo rate this time or it will only reduce its stock of outstanding FX swaps.
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