Hungary’s central bank tying itself in knots with policy guidance

By bne IntelliNews May 11, 2016

The Magyar Nemzeti Bank’s (MNB) easing cycle may or may not end this month, judging from the Hungarian central bank’s deputy governor's latest statement on May 11, as he sought to clarify earlier comments.

Some suspected a double bluff seeking to jolt the markets into alleviating pressure on the forint when the MNB warned investors against "exaggerated" expectations of monetary policy easing after it lowered the benchmark by 15 bp to 1.05% on April 26. Now Deputy Governor Marton Nagy might well be suspected of a triple bluff, as he announced on May 10 that the easing cycle may end this month, then backtracked on his comments the following day.

“The rate-setting decision is based on available information. As one member of the monetary council, I cannot foretell the decisions of the council in advance. Such interpretation of my statement is misleading,” Nagy told The Wall Street Journal on May 11.

Nagy had said the previous day that “there could be one more step [but] further steps are doubtful”. Although the minutes of the MNB’s Monetary Council’s April 26 meeting seem to echo Nagy’s original suggestion – they show that “several members  of the board emphasized the need for caution in relation to the extent of the cycle” – Nagy’s latest comments seek to imply that the policy path remains uncertain.

His "just one member" comment rings of false modesty also. Analysts suggested to bne IntelliNews earlier this year that Nagy is "extremely smart" and in fact "the brains behind the MNB". "A friend" added that he wouldn't want to work for the deputy governor, who is known as a tough task master and dominating force inside the MNB. "He always has a good reason for what he says," one analyst stated.

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