The forint went to a new record low again

HUNGARY - In Brief 11 Sep 2019 by Istvan Racz

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This morning, the forint weakened to EURHUF 332.15, a new record low. Apparently, yesterday's inflation data, which signalled the very likely continuation of loose central bank policy, and the rather unexpectedly revealed conflict between governor Matolcsy and finance minister Varga, had an impact.Regarding the latter, the Governor and the Minister have got in a conflict over the forint's exchange rate, but not so much on where the forint should be, but much more on whether the finance minister should make any comments on the exchange rate at all.It all started from the Governor, who spoke at a conference early this month on fiscal and industrial policies, i.e. indirectly on what the Minister should do to avoid problems if the German economic slowdown starts to affect Hungary, which he said normally happens within 6-9 months time. We commented on this lecture in an in-brief at that time. Then on the very next day and at the same conference, the Minister responded by saying that the German slowdown had been on for the last 20 months, without any visible negative impact on Hungary. So the danger is not necessarily big, but of course one needs to secure certain conditions to avoid a greater problem, including that the EURHUF exchange rate must remain calculable. This is probably something the Minister probably hears quite often from foreign investors, but coming from him it may have been understood as a reprimand to the Governor that the latter should limit himself to watching his own business. Then in a further, rather unfortunate, episode, the Governor responded in a harshly worded article, in which he distanced himself from three of the Minister's statements, followed ...