MNB says not at all interested in forint weakening

HUNGARY - In Brief 11 Jun 2018 by Istvan Racz
Following a similar statement by Finance Minister Varga, MNB vice governor and Monetary Council member Ferenc Gerhardt told InfoRádió on Friday that the forint's recent weakening vis-a-vis the euro is no matter of interest for the MNB. As the MNB has no exchange rate target, it will not tell how far the forint can go up or down. "In order to make the forint move this or that way, the Bank should keep such a crazy amount of reserves, which it would not be able to maintain. There is no sufficient FX reserves on the face of the Earth, which would enable a country to go against the whole global market or a European market."Reacting to claims that a weaker forint is good for the MNB as it creates profit for the Bank, Mr. Gerhardt said: "We are not a commercial bank. When we prepare a plan, we are not planning profits. The central bank's budget is fiction. Central banks do not have profits or losses."Well, the message is pretty clear. Not very far ahead of the June 19 rate-setting meeting, when the Bank's Q2 inflation report is to be discussed as well, Mr. Gerhardt kept himself to the party line, maintaining that the MNB is not under market pressure and is completely free to take any course of policy. His statement was fundamentally a correct reaction, although it was a bit too clear-cut and confident to our taste, sounding a little bit like Robert de Niro speaking on Donald Trump the other day.What little problem we see with statements like this, besides the fact that it leaves not much room for any MNB action regarding the forint between now and June 19, is that the exchange rate is the single most important factor to influence inflation in a small, open economy like Hunga...

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