Reliance on extra policy tools lessens relevancy of headline rate decisions
- Bank likely to keep the headline rate unchanged at 13.00%,
- Seen leaning more heavily on liquidity tenders and FX swaps tools to control financial conditions
- This lessens the relevancy of this week’s rate decision for markets
Following the bank’s emergency intervention and move to stabilise a volatile currency market two weeks ago, the bank are likely to keep the headline rate unchanged at 13.00%, with the board instead leaning more heavily on their liquidity tenders and FX swaps tools to control liquidity, tighten financial conditions and work against the market’s bias to sell HUF in periods of risk-off.
This all points to a more complex policy outlook for Hungary and will lessen the focus on monthly central bank rate decisions. Nonetheless, this month’s meeting provides a good opportunity for the board to detail their now multifaceted approach - with markets looking to gauge the longevity of their new regime.