THE CENTRAL BANK AND THE GOVERNMENT - A Hungarian Variation on a Recurring Theme
THE CENTRAL BANK AND THE GOVERNMENT - A Hungarian Variation on a Recurring Theme

Summary/Abstract: The Magyar Nemzeti Bank (MNB), the Hungarian National Bank, raised the policy rate in January 2011, the third time since the change in government that took place in May 2010. The rate increase drew a rebuke from the growth-focused government, which called it “unjustified” in a public statement of the Ministry of National Economy, roughly corresponding to a ministry of finance (MinFin) in the European practice. In fact, the ministry issued the third official statement condemning a rate hike. Differences of views between the central bank (CB) and the MinFin are customary in most countries. Ministers frequently complain in private, sometimes even publicly, about bank rates; but to lecture a central bank on the proper level of interest rates in official communication is a sign of bad education in high offices. The purists’ view on this particular issue would probably be that the Hungarian ministry’s comments were three too many. Those analysts who are more sympathetic to the government position might find the number of public statements two too many: the MNB’case for the latest increase from 5.75 to 6 per cent in January 2011 was not fully convincing (this is a case I consider in more detail below).

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