NBH Say Proposal to Replace BUBOR as Reference Rate "Misguided"

Central bankers Adam Banai and Zsolt Kuti have released a document on the NBH website, stating that a government proposal to replace the BUBOR as a reference rate is misguided. Some selected highlights from the document (via RTRS):

• Govt proposal to replace BUBOR as reference rate misguided.
• Ad hoc interventions into monetary transmission do not help sustainable economic growth.
• Proposals like replacing BUBOR harmfully narrow room for policy manoevure.
• Modifying reference lending rate would make banks interested in pushing up treasury bill yields.
• S&P comment on lending rate reform signals possible risk to Hungary's credit rating.

EURHUF has dipped on the back of the headlines, down 0.45% on the day at typing. HUF had faced some downside pressure earlier in the week when it was reported that two officials at the ministry proposed switching the main rate used by commercial banks to determine the interest charged on loans. Given the current yield of 3-month government bills ~2ppts below the interbank rate, analysts have said the implementation of the plan would thus lead to an effective lending rate cut.