MNB governor: Central bank “needs cautious, conservative policy”

Analysis

Hungary’s central bank, as well as the government, needs a cautious, conservative policy, National Bank of Hungary governor György Matolcsy said today at a forum organized by the American Chamber of Commerce.

Matolcsy said such a policy was warranted by the possibility of further waves from the Eurozone crisis. Because the rate of inflation is staying under the central bank’s 3% mid-term target, by definition there is a bit of room for further monetary easing, he added.

The MNB has cut rates at each of its monthly rate-setting meetings – albeit at a slower pace in recent months – since August 2012.

Matolcsy defended the MNB’s easing cycle, saying it was grounded on the current-account (C/A) surplus and the government’s successful management of the country’s state debt. He added that Hungary’s big C/A surplus makes the country different from Turkey and many other European Union members.

Answering questions at the forum, Matolcsy said international ratings agencies were poor evaluators of some economic trends, noting they had also contributed to the global economic crisis.

Matolcsy said political stability, as well as economic growth, had significantly improved the assessment of Hungary, but declined to comment on the sharp weakening of the forint today.

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