Are you sure?

Analysts welcome Orban's denial of higher inflation target

Analysts interviewed by MTI welcomed Prime Minister Viktor Orban's Saturday statement denying that the government planned to raise the inflation target from the 3% target currently in effect. Opinions varied more about Orban's comment on the distant euro accession target of no closer than 2020 or on his suggestion to (re)open a public debate between the current central bank governor Andras Surany and former central bank governor Gyorgy Suranyi on monetary policy.

Gyorgy Barcza of K+H Bank said it is definitely positive that the prime minister has denied earlier press reports on a government plan to raise the inflation target which is jointly set by the central bank and the government.
Referring to another statement by Orban,  Barcza said at present there is no confidence at the moment between the current Monetary Council and the government, adding that the existence of such confidence was a condition of cooperation. He added, however, that there will be confidence between the government and the new Monetary Council Central Bank governor.
Barcza was refering to the PM's statement that monetary policy should be restructured over the coming 2-3 months to create a calm and effective form of cooperation between the government and the new, expanded Monetary Council, as the current tensions are detrimental to the economy. Draft legislation would give the power to appoint the four external members of the Monetary Council to a parliamentary committee. At present, the power is shared by the prime minister and the central bank governor.
Speaking of the prime minister's suggestion that a debate between the current and one former central bank governor on the tools and objectives of monetary policy should be reopened, Barcza said the prime minister simply meant that the discussion presently conducted abroad on the role of central banks during the crisis should be conducted in Hungary as well.
Gergely Suppan of TakarekBank also said it was important that Orban said that the government was not planning to raise the inflation target, a move which would have definitely been ill-received by markets and would have hurt the country's credibility.
Orban's remark on no euro-zone accession before 2020 was not a problem as neither country in the region has a stated intention to join earlier,  Suppan said.
Zoltan Torok of Raiffeisen Bank noted that what the prime minister said regarding the euro adoption is a realistic assessment of the current situation. Hungary is clearly not ready for euro adoption, and it will not be ready in the next 1-2 years. And, Hungary's interests may not coincide with the euro zone moving towards a more uniform fiscal and tax policy,  Torok added.
In professor Laszlo Csaba's view, Hungary should adopt the euro as soon as possible, preferably before 2020, and the 2020 euro adoption date suggested by Orban was too remote.
He also said it was important that the prime minister confirmed the government's commitment to the 3% inflation target and this year's deficit target of under 3%. This, along with the February adjustment package and the planned reduction of the government debt, could help improve market confidence in the country, he said.
Csaba said, however, it would be unfortunate to conduct a debate on monetary policy tools, on interest rates and the forint exchange rate in public, and a Simor-Suranyi debate should take place on professional forums. All the more so because Suranyi's ideas are "unconventional" and "around 90%" of economists have reservations concerning his suggestions, Laszlo Csaba said.
A year ago,  Suranyi, who was central bank governor between 1995 and 2001, criticized the current NBH's policy and moves before and during the crisis in the daily Nepszabadsag. (Econews)