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New rate-setters say tensions ease between govt, central bank

Tensions between the government and the National Bank of Hungary have eased, two of the central bank's new rate-setters said in an interview published in Saturday's issue of daily Magyar Nemzet.

"Since we became members of the Monetary Council, these tensions cannot be felt," Ferenc Gerhardt told the paper. "The Central Bank Act clearly defines our tasks, and to this we hold," he added.

"At the moment, I don't see any kind of problem between the government and the central bank," said Gyorgy Kocziszky.

The relationship between the government and the central bank,  especially its governor, Andras Simor, became strained after Fidesz won a two-thirds majority in Parliament last spring. A government decision to give Parliament, instead of the central bank governor and prime minister, the power to pick external members of the Monetary Council heightened tensions and earned the disapproval of the European Central Bank. The move was seen as reducing MNB's independence and negatively affecting its credibility.

The mandates of the four external members of the Monetary Council expired on March 1. Parliament approved their replacements in the following weeks.

"The members of the Monetary Council are independent and have professional integrity. We would make a big mistake if we tried to conform to expectations," Gerhardt told Magyar Nemzet.