Budapest, 24 January 2024 From 31 January 2024, the Magyar Nemzeti Bank will discontinue the use of its variable-rate, maximum 6-month deposit facility. This decision is in line with the measures taken to streamline the Bank’s monetary policy toolkit, launched in autumn 2023, with the aim to enhance the role of the central bank base rate and improve the effectiveness of monetary policy transmission.
From 31 January 2024, the Magyar Nemzeti Bank (MNB) will discontinue the use of its variable-rate, maximum 6-month deposit facility. Since its introduction in the autumn of 2022, the instrument supported the MNB’s monetary tightening by absorbing liquidity for long-term tenores. At its meeting in September 2023, in line with changes in monetary conditions and financial market developments, the Monetary Council decided to simplify the MNB’s toolkit in several steps to enhance the role of the central bank base rate and thereby improve the effectiveness of monetary policy transmission. Following the steps taken in the autumn of 2023, the MNB remunerates the prevailing base rate on the full interest-bearing part of liquidity held on reserve accounts.
In line with the unification of reserve account remuneration and the simplification of the monetary policy toolkit, the optional part of the reserve requirement ratio was phased out from the beginning of 2024. Following the closure of the interest rate gap between the rates of policy instruments, the role of the long-term deposit facility in the monetary policy transmission has decreased. As the next step towards simplifying the monetary policy toolkit, the MNB will discontinue the use of the instrument from 31 January 2024. Reserve accounts will continue to be available uncapped to absorb banking sector liquidity. Thus, the decision will further enhance the role of the central bank base rate and the effectiveness of monetary policy transmission.
Magyar Nemzeti Bank
24 January 2024