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Leadership change in the Central Bank of Hungary: monetary policy take a turn unconventional?
The next change of leadership at the central bank of Hungary (MNB) strengthen the ruling party control over monetary policy and will raise fears that occur more aggressive cuts in interest rates combined with unconventional tools that pose a risk to the vulnerability of an emerging market economy. The MNB maximized yet cuts interest rates intervention and its ability to use unconventional policy tools is further limited by the loss of credibility, expectations of high inflation and large external financing risks in the country . We therefore believe that the Bank will continue to focus on interest rate cuts intervention, lowering him to 4.75% by year end. The risks are tilted towards a more aggressive easing, especially if the risk environment globally forint remains favorable. The current finance minister and leading candidate for the position of maximum MNB, György Matolcsy, remains the wildcard politician: his nomination would probably lead to MNB towards a more risky and unconventional and put pressure on Hungarian assets.
By Jelena Vukotic.
Source: The Economist. 01/29/2013
