"Will no one rid me of this turbulent central banker?" Hungarian Prime Minister Viktor Orban may not have voiced this sentiment but since he took power last year he is likely to have thought it more than once. Increasingly, the spat between Orban's government and central bank governor Andras Simor brings to memory the quarrel England's Henry II had with his Archbishop of Canterbury, Thomas Becket, over the rights and privileges of the Church almost 900 years ago. Simor stands accused of undermining economic growth by holding interest rates too high and resisting government demands for monetary stimulus. The government's efforts to sideline Simor are viewed as infringing on the central bank's independence.
A fresh twist in Hungary’s Swiss franc debt saga. The ruling party, Fidesz, is proposing to offer mortgage holders the opportunity to repay their franc-denominated loans in one fell swoop at an exchange rate to be fixed well below the market rate. This is a deviation from the existing plan, agreed in June, which allows households to repay mortgage installments at a fixed rate of 180 forints per Swiss franc (well below the current 230 rate). Households would repay the difference, with interest, after 2015.
Pity Hungary’s central bank. If ever there was a country that needed an interest rate cut, here it is. With the euro zone in the doldrums, the Hungarian economy is taking a big hit, with April-June growth coming in at a measly 1.5 percent on an annual basis, well below expectations. Quarter-on-quarter growth was in fact zero. Data last week showed annual inflation at two-year lows last month. Despite a cut to personal income tax rates this year, household consumption is stagnating. Unemployment is running at 11 percent.
from Global Investing:
Ministers and bankers meeting at the European Bank for Reconstruction and Development's annual gathering in London tomorrow and Saturday have a sorry mess to scrutinise.