UPDATE 2-Hungary cbank to get two new rate-setters on Mon

Sun Mar 6, 2011 4:27pm EST

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* Fidesz to fill half of vacant MPC spots-Socialist source

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* Both economists held cbank posts under former Gov Jarai

* Picks positive, delay in nominations harmful-analyst (Releads, adds byline, analyst comment)

By Krisztina Than and Gergely Szakacs

BUDAPEST, March 6 (Reuters) - Hungary's ruling party will nominate two economists with central bank experience to the Monetary Council on Monday, restoring the functionality of the rate-setting panel but leaving half of the open spots vacant.

Analysts have closely followed the nomination process for clues whether the ruling Fidesz party, which shocked markets with a string of unorthodox measures since taking power in May, will appoint economists supportive of its pro-growth agenda.

The seven-strong Monetary Council has been reduced to just three members, Governor Andras Simor and his two deputies, since the mandates of four policy makers expired on March 1, leaving the panel without a quorum to make decisions.

Government-sponsored legal changes, sharply criticised by the European Central Bank (ECB), gave parliament's economic committee, controlled by Fidesz, the right to fill the vacancies but so far there are only two candidates for the four posts.

Istvan Jozsa, deputy head of parliament's economic committee, which is in charge of the nomination process, told Reuters on Sunday that Fidesz would nominate Ferenc Gerhardt and Andrea Bartfai-Mager to the rate-setting panel.

Jozsa added that the changes to the nomination rules which the government pushed through earlier this year, were totally unjustified.

Antal Rogan, a lawmaker of the ruling Fidesz party and chairman of the committee, was not immediately available for comment. The central bank's press office declined comment.

Both economists held posts at the central bank under previous Governor Zsigmond Jarai, who was succeeded in 2007 by Andras Simor -- a needle in the eye of the new Fidesz government for his former investments and conduct of monetary policy.

Jarai currently leads the central bank's supervisory board and criticised pay levels and communications spending at the bank on Friday, opening a new chapter in the feud between the centre-right government and Simor. [ID:nLDE7231TQ]

PROCRASTINATION

The nominations, subject to the approval of parliament due later on Monday, will restore the size of seven-strong Monetary Council to the minimally required five policy makers.

That would give Fidesz three more weeks to find two other nominees before the next scheduled policy meeting on March 28.

Parliament's economic committee meets at 0830 GMT on Monday.

Central bank Governor Simor holds a news conference about the bank's finances at 1300 GMT.

Gerhardt, a 66-year-old economist, is deputy chief executive of Hungarian development bank MFB and worked as a director at the central bank between 2005 and 2007.

Bartfai-Mager worked at the financial stability department of the central bank before joining the competition council of the Hungarian Competition Office in 2007, where she had worked until 2010.

For a factbox on the nominees, see [ID:nLDE7250KE]

Gergely Suppan, analyst at Takarekbank welcomed the fact that the nominees both had central bank experience but added that a further delay in the nomination was detrimental.

"It's good news in terms of this step restoring the functionality of the council, however, I just cannot understand what the delay is all about," he said.

"These two names are positive in that they have central bank experience, especially at the financial stability department, but the procrastination (about the remaining appointments) is negative."

Local media has reported Fidesz was having difficulty filling the vacancies on the Monetary Council after recent pay cuts. [ID:nLDE7211CQ]

Analysts said the new Council was unlikely to embark on an easing campaign and would act cautiously, taking into account inflation risks and the forint's exchange rate as a weak forint would hurt borrowers who took out foreign currency loans. [ID:nLDE7211CQ]

The central bank raised interest rates 75 basis points to 6 percent NBHI between November and January before pausing last month. (Reporting by Krisztina Than and Gergely Szakacs, Editing by Bernard Orr)

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