Boosting Hungary’s economy should be the task of fiscal not monetary policy, as any drastic cut in rates would present serious exchange rate risk, Aegon Asset Management CEO Péter Heim said on Thursday.
In a country such as Hungary, where net external foreign currency debt exceeds 50% of GDP, a drastic cut in rates would carry great risk, Heim said.
Hungary’s base rate, at 11.00%, is the highest in the EU. It remains an anomaly as other central banks around the world cut rates to counter the global economic slowdown. Central bank (MNB) governor András Simor on Wednesday said the base rate was higher than the inflation rate would justify, adding it would be cut at a pace the market could sustain.
Former finance minister and deputy head of opposition party Fidesz Mihály Varga on Thursday, criticized the National Bank of Hungary’s handling of the financial crisis, for not raising rates earlier and at a less drastic pace -- which would have allowed rate cuts sooner -- and for failing to fill up foreign currency reserves. (MTI-Eco)