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Interest rate cut criticised and praised

September 27th, 2012

According to Népszabadság ‘the air is getting thinner’ around the President of the National Bank – meaning that he is running out of breathing room – and he should consider resigning. Magyar Nemzet welcomes what it calls a break with old dogmas.

Reporting in Népszabadság on the second cut in the main interest rate of the National Bank in a single month, Zoltán F. Baka recalls that Bank President András Simor already disagreed with the first cut in August, on the grounds that inflation was higher than expected. He and his two vice presidents have obviously been voted down by the four “external” members of the Monetary Board appointed by the government. Simor, Baka continues, has resisted pressure from the government to lower the interest rate for two years, and could not be removed. Now he has another five months in office before his term expires, but Népszabadság’s analyst believes he should seriously consider stepping down in order to save his professional integrity.

In Magyar Nemzet, Zsuzsa Nagy Vajda welcomes the fact that the “external members” have finally gathered the courage necessary to challenge Simor”s “high interest rate dogma”. By lowering the main rate, they have made investments cheaper and recovery easier. Simor’s usual warnings, Nagy Vajda continues, have been refuted by the first market reactions, for no significant flight from the Hungarian currency has occurred. Business demands further interest rate cuts, she asserts, and adds that these are feasible, albeit in small, gradual steps.

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