About the interbank HUF liquidity – what does the MNB’s new liquidity forecast show?

Based on the decision of the Monetary Council of 6 September 2010, the MNB began publishing its HUF liquidity forecast. The central bank has been preparing forecasts on the liquidity of the banking system for internal use for a long time, but from now on it will share these with market participants on a weekly basis, before the MNB bond auction on Tuesday. With this publication, the central bank tries to ensure – by supporting the liquidity planning of credit institutions – that the volume of the base instrument, the two-week MNB bond is as close to the ideal quantity as possible, i.e. to reduce the reliance of participants on the availability of the overnight loans and deposits of the central bank. The latter may divert the market interest rates from the level close to the base rate of the central bank. Publication may also reduce the uncertainty of liquidity managers in the banking system and encourage them to use the interbank markets more actively. The MNB’s information advantage, which is the result of the existing institutional relations and the greater resources than those of the market actors, is another factor supporting the publication of the forecast. Although the central bank’s forecast cannot project the HUF liquidity of the banking system accurately, it still contains a considerable amount of additional information for credit institutions. With this publication, the MNB will disclose, at 10 o’clock on Tuesdays, before to the central bank bond auction, the average inter-bank HUF liquidity expected over the next week based on Tuesday.