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Forint plunges but Bank chief’s lips are sealed

February 1st, 2014

A pro-government commentator says cutting interest rates was good policy until now, but National Bank leaders should heed the clear signs that the markets want a rise.

Following the Turkish Lira and other emerging currencies, the Forint rapidly fell against the Euro on Thursday and Friday. Prime Minister Viktor Orbán’s statement that the exchange rate is the competence of the National Bank created a flurry of protests in the opposition media.

Magyar Nemzet’s editorial lambasts leading Fidesz politician Antal Rogán for trying to explain away the plunge as normal January market volatility. Tamás Nánási points out that the Forint came under speculative pressure, along with other currencies, after the Fed started rolling back the policy of quantitative easing. An exchange rate above 300 is painful and harmful for the economy, he says, and although National Bank Chairman Matolcsy must not “slavishly follow” the example of the issuing banks of Turkey and South-Africa who raised interest rates, “belligerent rhetoric may be unproductive in a sensitive situation”, the Magyar Nemzet columnist warns.

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