Former Hungarian central bank governor György Surányi said the forint’s exchange rate is artificially strengthened and inflation artificially suppressed. He made the remarks at a conference organised by VOSZ, the employers’ association. Surányi blamed the extreme tightness of monetary policy for both effects.
Capital inflows and short-end gap
Surányi said capital inflows into Hungary since April have exceeded 5,000 billion forints, more than 14 billion euros. He argued that as long as the short-end gap between forint rates and European rates stays this wide, foreign capital can carry out risk-free speculation. Banai, the MNB’s deputy governor, presented a different view at the same event. He said that when inflation is low in Hungary, the performance of the Hungarian economy is typically also higher.
Criticism of the utility subsidy plan
He said the subsidy is not targeted, encourages energy waste and is cross-financed. As a result, he argued, Hungarian companies pay the third-highest energy bills in Europe. He proposed lifting price caps, ending utility subsidies in their current form and freezing water and sewage fees.
Banai argued that the forint’s rapid strengthening this year has pressured exporters who pay costs in forints. He said the main problem is wage growth outpacing productivity. According to MNB analyses, he added, exchange rate changes and export volumes are practically unrelated.
