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Central Bank Governor calls for new convergence program for euro entry

A new convergence program is needed for Hungary to be ready to join the euro zone in 2011, Hungary's central bank Governor Zsigmond Járai said on Thursday.

"I believe that this (current) convergence program will not lead us to the euro," DowJones quoted Járai as addressing a conference, in Frankfurt. He said the central bank is "very skeptical" of any plan for Hungary to meet the convergence criteria in 2011, adding it is "really difficult" to say the current convergence program contains real reforms. The government has given up a euro entry target date in the summer. "A new introductory date could be four years after a good program is announced," Járai said. He also said there is no agreement within Hungarian society about economic reform programs. Inflation will be the "number one" concern when the Hungarian central bank's 13-member policy group meets Monday, Járai said. Hungarian inflation was 6.3% in October, up from 5.9% in September, and is expected to accelerate to around 8% in the first quarter of next year as a result of the government's fiscal austerity measures. Járai said he concurred with other officials that when inflation expectations rise, the usual response is to raise interest rates. But he also pointed to the strengthening currency, and noted that while it is the central bank's "duty" to restrain monetary conditions amid higher inflation, interest rates aren't the sole instrument to do so. "I'm not saying that an interest rate increase is the only option," Járai said. (Mti-Eco)