Hungary Moves to Reassure Market on Central Bank Governor Change
(Bloomberg) -- Hungary’s government moved to reassure investors who have been anticipating a shift in monetary policy after a change of leadership at the central bank next year.
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While the economy would benefit from lower interest rates, traders shouldn’t expect the new governor to take big risks in monetary policy after Gyorgy Matolcsy’s term expires in March, Gergely Gulyas, the minister in charge of the prime minister’s office, told reporters Thursday.
The forint, which hit the weakest in almost two years after the US elections last week, reversed intraday losses to gain 0.1% to 407.3 per euro by 1:13 p.m. in Budapest. The forint’s slide since September has forced the central bank to pause its interest-rate cuts even as the economy slipped back into recession.
The government is interested in avoiding large volatility in the forint, though the cabinet has no exchange-rate target and currency policy rests with the central bank, Gulyas said.
He acknowledged that Finance Minister Mihaly Varga was widely expected to succeed Matolcsy, though he said the decision rests with Premier Viktor Orban. Those who are familiar with Varga understand that he won’t engage in sharp monetary easing that would shock the market, Gulyas said.
Orban in September narrowed the field of potential successors to Varga and Economy Minister Marton Nagy. He said he planned to combine the economy and finance portfolios, giving one minister the job of running the “superministry” and the other the task of helming the National Bank of Hungary.
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