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Parliament committee approves rate-setter nominees

Parliament's Economy and IT Committee on Monday approved the nominations of two economists to fill vacant spots on the National Bank of Hungary's rate-setting Monetary Council.

Parliament approved János Cinkotai and György Kocziszky for the spots. Cinkotai's mandate will start on March 22, but Kocziszky's appointment will become effective only from April 5, after the Monetary Council's next rate-setting meeting on March 28.

The two men were nominated by Antal Rogán, chairman of Parliament's Economy and IT Committee, and approved by the committee at a meeting in the morning on Monday.

The National Bank of Hungary's 3% inflation target is achievable, Cinkotai said at a hearing before the committee. He added that he was convinced the government does not want to change the inflation target.

The central bank's "price stability" policy and the government's aim to foster economic growth appeared at odds at times and may have fueled speculation that the government wanted to raise the joint inflation target it sets with the NBH.

Inflation always weighs on average Hungarians the most, which is why it has to be fought, Cinkotai said. There are external price shocks to which monetary policy does not have to react immediately, he added.

Asked about the effect on inflation of extraordinary taxes levied on the financial, retail, telecommunications and energy sectors from 2010, Cinkotai said that because of intense competition, the effect was "not too high, and not quantifiable".

Koczisky told the committee that state debt does not need to be fetishised, but as long as state debt cannot be financed from internal resources, reducing it is of strategic importance, he added.

Answering a question, Kocziszky said the Maastricht criteria for inflation supports economic growth.

The criteria, applied to EU members who want to adopt the euro, limits CPI to 1.5 percentage points over the average rate of the three EU member states with the lowest inflation over the previous year.

MTI learnt that the nomination of Cinkotai, who is an external advisor to NBH governor András Simor at present, conveys a gesture.

The relationship between the government and Simor has been strained since 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 NBH's independence and negatively affecting its credibility.

Mr Kocziszky is the dean of the University of Miskolc's Department of Economic Studies.

The mandates of the four external members of the Monetary Council expired on March 1. Parliament approved the appointments of two replacements, Ferenc Gerhardt and Andrea Bartfai-Mager, both economists and former central bankers, on March 7.

Gyorgy Barta, an analyst with CIB Bank, told MTI that the nominees' statements suggest they will exercise a sober rate policy and loosen only if there is room.