(Bloomberg) -- Hungarian Prime Minister Viktor Orban sent another salvo at the central bank, blaming it for being slow to rein in the European Union’s highest inflation rate.
The government had to “take over” the central bank’s role to slow price growth by setting a goal of taking inflation down to to below 10% by the end of the year, from a peak above 25% in January, Orban said in a speech to lawmakers on Monday.
Orban and his top lieutenants on economic policy have traded blame with central bank Governor Gyorgy Matolcsy over Hungary’s hard landing, which has produced a year-long recession, surging prices and the highest borrowing costs in the EU.
Now each side is trying to take credit for disinflation, one of the few positive trends which has seen the consumer price index drop to 16.4% in August, though it’s still the EU’s highest.
“The government has taken over the task and responsibility of fighting inflation,” Orban said. “This is a novelty as usually it is central banks and not governments which have inflation targets.”
The forint weakened for a sixth consecutive day as traders braced for the latest in a series of full percentage-point key interest rate cuts flagged by the central bank for Tuesday. Its drop accelerated as investors raised rate-cut bets after Matolcsy last week predicted inflation dropping to 7% by December, potentially widening the room for further monetary easing.
The forint fell 0.4% to 391.3 per euro by 2:45 p.m. in Budapest, the biggest intra-day drop among 23 emerging-market currencies. Traders have grown increasingly concerned that rising oil prices risked fanning inflation, making it difficult for major central banks to reduce their own key interest rates, further pressuring emerging-market assets.
Orban, whose government has simultaneously prodded the central bank to raise its 3% inflation target, has introduced a system of price caps on basic staples as well as a price-monitoring mechanism.
Hungary’s Economy Chief Renews Central Bank Clash Over Rate Path
Matolcsy last week rebuked Orban’s cabinet for fanning price-growth with pre-election spending, the price caps that he said ended up raising inflation, as well as a failure to rein in a record budget shortfall this year.
(Updates with Orban quote in fifth paragraph, forint in sixth and seventh paragraphs.)
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