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Banking

<b>Hungary - A victim of its own success</b>

    Headline: Hungary - A victim of its own success
Source: Euromoney
Date: March 2000
Author: Nigel Dudley

Hungary is the favoured east European convergence play of many international investors. But the inflow of funds to the domestic bond and equity markets has been tricky to manage. The central bank has slashed interest rates, raising fears about inflation. If Hungary does make it into the EU and EMU, its problems will shift again. Hungary will face the familiar problem of all small euro sovereigns: a disappearing domestic investor base. Nigel Dudley reports


Gyorgy Suranyi







Gyorgy Suranyi has earned a reputation for prudence, caution and common sense in more than a decade as president of the National Bank of Hungary. So markets were stunned in the middle of January when interest rates, which the central bank normally adjusts by 25 basis point steps, were slashed by 150bp.

Western bankers had been expecting a cut in rates as the government and central bank became increasingly alarmed at what they called the "almost frightening" inflow of foreign money. Even though the central bank was buying large amounts of foreign exchange, the forint was hard against the top of its exchange rate band.








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