Monetary Policy - The MNB Announced Measures That Preserve Opacity And Lack Force Against Forint Weakness

The MNB announced measures at today’s originally non decision-making meeting, though the announcement fell short of communicating a concrete interest rate increase.

The central bank governor stressed the importance to achieve security and trust in the financial market. Also, Matolcsy said the forint is safe, a rare mention of the importance of the currency for the monetary policy.

 

All in all, we believe that the new tools could be enough for the central bank to reach out to the corporate sector and make sure that the banking sector provides companies with new financing amid the coronavirus. Also, announcements make it easier for the MNB to raise the interest rate in the short end of the yield curve if it judges circumstances require so. Some parts (primarily the new asset purchase program) are, however, not detailed enough to come to a definite conclusion, but it seems that the measures on balance would reduce if not eliminate the cheap excess liquidity from the interbank market and pave the way for tighter conditions should circumstances (mostly related to the forint) require so. The drawback of this complex system remains its lack of transparency, being prone to ad-hoc decisions.