The MNB revealed why it raised interest rates today

In its response, the MNB also emphasized that it remains committed to achieving price stability and is also monitoring the evolution of short-term money market interest rates.

As we noted in a separate document, although a decisive Monetary Council meeting was held on Tuesday to decide the key inflation rate, which was unchanged at 0.6% in light of the recent inflation report, two days later it was produced an effective rate hike, since the one-week deposit bid went from 6% to 0.75%. This is not officially decided by the Monetary Council, but by the Board of Directors of the MNB, and as the Governor of the Central Bank indicated on Tuesday: in the one-week deposit bids, the interest rate offered is decided individually each week. According to them, on Tuesday, in possession of the recent inflation report, the Monetary Council still did not consider it justified to increase the key rate, but today the Board of Directors has already done so and therefore announced the symbolic increase in interest rates. This is not necessarily a strategy that supports the credibility of the central bank, which is presumably due to the fact that the forint has further weakened against the euro since Tuesday and has already approached its all-time low this morning.

Therefore, the MNB (inflation above target, but an economy that needs support) between the two fires seems to be trying to deal with the situation not by officially raising interest rates by the Monetary Council, but by the Board of Directors. and deciding the weekly tenders in the coming weeks. when at what interest rate it announces bids for deposits. With the level of the interest rate offered in the tenders (and the amount of deposits accepted), the central bank can have a significant effect on interbank liquidity and, through it, on the exchange rate of the forint, and therefore it can also indirectly affect inflation risks.