January 10, 2019 / 12:19 PM / 2 months ago

UPDATE 2-Hungary PM won't say if he'll re-nominate central bank head

* Governor Matolcsy’s six-year term expires in March

* No heir apparent if Matolcsy is eventually replaced

* Next Governor will have to navigate exit from loose policy

* Orban’s remarks leave door open on eventual pick -analyst (Adds detail, analyst comment)

By Gergely Szakacs and Marton Dunai

BUDAPEST, Jan 10 (Reuters) - Hungarian Prime Minister Viktor Orban declined on Thursday to say whether he planned to re-nominate Gyorgy Matolcsy for another term as central bank governor when his current term expires on March 4.

Matolcsy, the head of the National Bank of Hungary since March 2013, has implemented a batch of monetary-easing measures to curb borrowing costs and flood the economy with cheap credit to aid a government drive to boost growth.

The measures have slashed interest rates and sparked a lending boom, but core inflation is projected to rise steadily in the coming months and market participants expect the central bank to start tightening policy soon.

There is no heir apparent and no one has publicly signalled an interest in the job, which will involve navigating Hungary’s exit from years of ultra-loose monetary policy.

“No surprises are expected,” Orban told a news conference on Thursday twice in response to questions about Matolcsy’s succession. He declined to say explicitly whether that meant he would re-nominate Matolcsy, his close ally.

Matolcsy has rate-setting meetings this month and next before his mandate expires. His term can be renewed for another six years pending a formal decision by Orban.

The central bank’s press office did not immediately respond to emailed questions to Matolcsy about whether he would take on the job for another six years if Orban asked him.

Peter Virovacz, an economist at ING Bank in Budapest, said Orban’s response left the door open to both outcomes.

“No surprises are expected could still mean anything, either Matolcsy staying or someone else taking over,” he said. “This is a decision which Orban is unlikely to divulge in early January.”

“But whoever gets to lead the central bank, with core inflation rising over 3 percent, the central bank will have to normalise monetary policy.”

Orban also said Hungary did not have a clear view about the future of the European Union currency, the euro, and therefore it was not appropriate to set a target date for its entry.

“Whether this will be in Hungary’s national interest at some point in the future, we will have to constantly evaluate that and we can make such a decision if it serves our interests.” (Reporting by Budapest bureau; editing by Hugh Lawson, Larry King)

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