Gyorgy Matolcsy, Hungary’s new central bank president, moved to solidify his authority by stripping two vice presidents appointed by his predecessor of their areas of responsibility. The forint dropped.
Matolcsy shifted responsibility for monetary strategy and financial stability to Adam Balog, his new vice president, according to the Magyar Nemzeti Bank’s new articles of association published in the official gazette today. The areas previously were assigned to Ferenc Karvalits and Julia Kiraly respectively.
Matolcsy, the architect of Prime Minister Viktor Orban’s self-styled unorthodox policies as economy minister, previously urged the central bank to embrace unconventional monetary tools to stimulate the economy after his budget policies helped push the economy into recession last year. Matolcsy already barred deputies from independently representing the MNB and gave himself the right to decide all appointments, firings and salaries, underscoring investor concern for the institution’s independence.
“This is a terrible loss of talent and expertise all in the name of politics,” Peter Attard Montalto, a London-based strategist at Nomura Holdings Inc., said in an e-mail. “It will however continue as a more wide ranging group of senior and middle ranking staff are ’cleansed’ to remove any opposition to unorthodox policy.”
The forint erased its gains today against the euro and traded down 0.4 percent at 299.91 per euro by 6:12 p.m., the fourth-worst performance in the world. The currency dropped 5.5 percent against the euro in the past three months, the most of 10 emerging-market currencies in Europe, Middle East and Africa tracked by Bloomberg.
Orban and Matolcsy spearheaded the government’s criticism of the central bank under former president Andras Simor, drafting a central bank law that the European Central Bank said undermined monetary-policy independence before the Cabinet compromised to amend it.
Monetary policy makers delivered seven consecutive quarter- point rate cuts, bringing the benchmark to 5.25 percent, matching the lowest on record. Simor and his two deputies opposed the easing, citing inflation faster than the central bank’s 3 percent target and the limited impact on lending and economic output.
The central bank, in cooperation with the government, can expand sources of corporate lending, which is “key” to ending recession, Matolcsy wrote in his weekly Heti Valasz column on March 7.
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