Hungary shows what happens when central banks lose independence

Summary

Marketplace Morning Report

Episode: Hungary shows what happens when central banks lose independence
Date: August 29, 2025
Host: Nova Safo (in for David Brancaccio)

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Overview

This episode explores how central banks' independence is being challenged—highlighting current U.S. debates around the Federal Reserve's autonomy, and comparing the situation to Hungary under Viktor Orban. The show also covers the latest U.S. inflation data, market reactions, and how these events are impacting both consumer behavior and global economic policy.

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Key Segments & Discussion Points

1. U.S. Inflation Update and Implications for the Fed

(00:57–02:55)

• Monthly inflation data: July’s PCE price index rose by 0.2% month-over-month; core inflation reached a 2.9% annual rate.
• Fed’s potential response:
  • Christopher Lowe, Chief Economist, FHN Financial: Expectation that the Federal Reserve may cut rates soon, most likely by a quarter point rather than a larger ("jumbo") cut, unless surprising data emerges.
    • Quote: “Waller said he continues to support a quarter point cut in September. He does not yet favor a jumbo cut, as he put it, but he said he might if the data between now and then come in that way.” (01:37 – Christopher Lowe)
  • Market expectations: Futures markets price in an 85% probability of a rate cut.
    • Mortgage rates are dropping, reflecting declining long-term yields—a sign the market believes a cut is justified, especially amid political tension over Fed policy.
    • Quote: “The move in mortgage rates, I think, [is] more important because that reflects longer yields... the market concludes [a] cut is justified. Which is really important given the political environment surrounding the Fed right now.” (02:25 – Christopher Lowe)

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2. Best Buy’s Financial Performance and Consumer Electronics Demand

(03:47–05:09)

• Best Buy’s share performance: Stock fell despite strong earnings, due to concerns about consumer sentiment and the impact of inflation on discretionary spending.
  • Reporter Henry Epp: Consumers are wary about inflation but electronics remain essential, with most people on a “three to five year” gadget upgrade cycle.
    • Quote: “Lots of people bought new gadgets five years ago during COVID lockdowns. Now they want new ones with more capabilities.” (04:37 – Henry Epp)
  • Gaming consoles (notably Nintendo Switch 2) drove increased foot traffic and related sales.
  • Uncertainty remains as tariffs may put upward pressure on future prices.

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3. U.S. Central Bank Independence under Threat

(05:16–05:47)

• Context: President Trump’s campaign includes firing Federal Reserve Governor Lisa Cook over unproven fraud allegations, a move she is challenging legally.
• Concerns: Fed independence has historically been a cornerstone of the U.S. financial system. Erosion of independence could lead to instability.

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4. Hungary as a Case Study: What Happens When Central Banks Lose Independence

(05:47–09:13)

• Interview: David Brancaccio speaks with Nick Thorpe, BBC Central Europe correspondent.

• Hungary’s Experience:

  • Viktor Orban’s rise (2010): Gained enough power to control key institutions, including the central bank.
    • Quote: “He put in his friend George Matolci there to deal with the economy, to steer it, to use it really as a political mode, to increase his own power until this year.” (06:09 – Nick Thorpe)
  • Bank as political tool: The Hungarian central bank adopted risky but lucrative policies, such as weakening the forint, benefiting Orban’s inner circles.
    • Quote: “[They] pushed through measures which seemed risky at the time, but which paid off. Really, one of the biggest ones... was to weaken the Hungarian forint... and a lot of that money sort of went to the immediate kind of court of Viktor Orban.” (06:54 – Nick Thorpe)
  • Diminishing independence: Laws in 2024 further reduced central bank autonomy to curb the influence of Orban’s former ally Matolci, after conflicts emerged.
    • Quote: “Laws were passed in 2024... to rein in the independence of the Hungarian national bank because it had been run by Mr. Orban's ally as a sort of private fiefdom...” (07:54 – Nick Thorpe)
  • Mixed economic results: Hungary’s growth has been modest (real growth between 0.8% and 1.8%), and the economy is vulnerable due to an overemphasis on Chinese electric vehicle battery investment.
    • Quote: “Hungary’s really thrown all its eggs into the Chinese battery production market. Hungary is really gambling on the electric vehicles…” (08:44 – Nick Thorpe)

• Comparisons and caution:

  • While there are parallels between Hungary and MAGA-style populism in the U.S., Nick Thorpe urges caution in drawing direct comparisons—each context is unique.

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Notable Quotes & Memorable Moments

• On the importance of data-driven decisions at the Fed:
  “As long as the data come in as expected, like today's, then the Fed probably should adjust rates soon.” (01:55 – Christopher Lowe)
• On political pressures:
  “Which of course is really important given the political environment surrounding the Fed right now.” (02:43 – Christopher Lowe)
• On Hungary’s economic risks:
  “Hungary is really gambling on the electric vehicles. And some of the more kind of cautious economic voices are saying, wait a minute, we don't even know how popular electric vehicles are going to be in a few years time.” (08:44 – Nick Thorpe)

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Timestamps for Key Segments

• U.S. Inflation Update & Fed Reaction: 00:57–02:55
• Best Buy & Consumer Electronics Market: 03:47–05:09
• Threats to U.S. Fed Independence: 05:16–05:47
• Hungary Case Study/Orban & Central Bank: 05:47–09:13

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Tone and Style

The episode maintains a direct, factual, and measured tone, with brief but insightful analysis from expert guests and correspondents. The conversation is accessible but brisk, reflective of Marketplace’s news-driven style.

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Conclusion

This episode offers listeners a concise yet rich look at:

• The state of U.S. inflation and market expectations for interest rate cuts.
• The fragile link between politics and policy at the Federal Reserve.
• A cautionary tale from Hungary about the long-term risks when central bank independence is undermined, offering a valuable international perspective as the U.S. grapples with rising political influence over its own monetary policymaking.

Transcript

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[David Brancaccio]

O.Com the latest inflation reading and what to expect at the Fed for Marketplace I'm Nova Safo in for David Brancaccio. The July reading of the Federal Reserve's preferred inflation gauge came in this morning. As expected, the PCE price index from the Bureau of Economic Analysis rose 0.2% month over month. Core inflation, which strips out volatile categories and can give a better read of where prices are headed. 10 kicked up slightly to an annual rate of 2.9%. Joining me now is Christopher Lowe, chief economist at FHN Financial in New York. Good morning.

[Christopher Lowe]

Morning.

[David Brancaccio]

No, so the Fed is going to look at this PCA report and conclude what?

[Christopher Lowe]

Well, you know, we heard from another Fed voter last night, Chris Waller, one of the governors. Of course, he's one who also dissented in favor of cutting in July. But Waller said he continues to support a quarter point cut in September. He does not yet favor a jumbo cut, as put it, but he said he might if the data between now and then come in that way. In the meantime, though, the case he made is similar to the one we heard from Jay Powell at Jackson Hole. And that is as long as the data come in as expected, like today's, then the Fed probably should adjust rates.

[David Brancaccio]

Soon and markets pretty much expecting that. We're seeing mortgage rates moving lower to a 10 month low. So a done deal September, you know.

[Christopher Lowe]

It'S priced in in futures at about an 85% probability. So that's pretty convincing. The move in mortgage rates, I think more important because that reflects longer yields, 10 year bond yields coming down. That's what mortgages price off of. And that means not only that the market expects a cut, but that the market concludes cut is justified. Which of course is really important given the political environment surrounding the Fed right now.

[David Brancaccio]

Christopher Lowe, chief economist at FHN Financial in New York thank you, thank you.

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[David Brancaccio]

Best Buy shares are pointing lower this morning in pre market trading and fell nearly 4% yesterday, despite the retailer posting better than expected quarterly financial results. Why the disconnect? Well, the devil's in the details.

[Henry Epp]

Marketplace's Henry Epp reports consumers have been weathering high inflation. They're worried prices will keep rising and they're generally not feeling great about the economy, which in theory could lead them to pull back spend on discretionary items, including phones and laptops and video games.

[Christopher Lowe]

Technically, yes, it is a discretionary category, and I know very few young adults.

[Nick Thorpe]

Who think of it that way.

[Henry Epp]

Julie Osk is an independent tech analyst. Electronics are essential to a lot of consumers and they have a shelf life, says Randy Burt at AlexPartners.

[David Brancaccio]

For PCs laptops, you're probably on a.

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Three to five year cycle.

[David Brancaccio]

Generally.

[Henry Epp]

Lots of people bought new gadgets five years ago during COVID lockdowns. Now they want new ones with more capabilities, burt says. And really one gadget in particular. In the last few months, the Nintendo.

[David Brancaccio]

Switch 2 gaming was the biggest source of upside in the quarter.

[Henry Epp]

Matt McCartney is at Wedbush Securities. The consoles, he says, got people through the Best Buy doors this summer, and once they were there, they also bought games and accessories.

[David Brancaccio]

That improved foot traffic led to a broader increase in the category.

[Henry Epp]

The question now is whether that traffic keeps up as tariffs trickle into consumer prices. I'm Henry Epp for MarketPL, where following.

[David Brancaccio]

President Trump's campaign against Central bank independence, specifically his move to fire Federal Reserve Governor Lisa Cook over unproven allegations of mortgage fraud. Cook has filed a lawsuit to challenge those efforts. There's a hearing scheduled in the next hour. Fed independence has been a strength of the US Financial system. So what happens if Trump ultimately succeeds? For a lesson on that, we turn to Hungary and the BBC's Central Europe correspondent Nick Thorpe. He spoke with David Brancaccio President Trump's.

[David Brancaccio (interviewer)]

We could say, favorite European leader, Prime Minister Viktor Orban of Hungary has been, I think, a laboratory for a kind of Maga style populism. It has its differences, it has its similarities. I want to ask you, though, when does it become clear that Viktor Orban wants to influence, if not control, the central bank in Hungary?

[Nick Thorpe]

I think 2010 is a useful date to begin with, David. That's when Viktor Orban returned with a two thirds majority, a massive landslide victory, which gave him really the power to do what he wanted to do. He put in his friend George Matolci there to deal with the economy, to steer it, to use it really as a political mode, to increase his own power until this year.

[David Brancaccio (interviewer)]

Now, in terms of how the economy has responded to some of these changes, it's been a, shall we say, uneven record. Lot of inflation there in some of those years, a cap on interest rates, which certainly sidelines the central bank in terms of its biggest policy tool.

[Nick Thorpe]

It has been up and down. There have also been no boom years. For example, from 2014 probably to 2019, the central bank, they pushed through measures which seemed risky at the time, but which paid off. Really, one of the biggest ones of those was to weaken the Hungarian foreign, which of course increased the value of Hungary's foreign currency reserves. And so suddenly there was a lot of money and a lot of that money sort of went to the immediate kind of court of Viktor Orban.

[David Brancaccio (interviewer)]

Foreign, of course, is the national currency of Hungary. Now, we were drawing parallels between Donald Trump and Viktor Orban of Hungary, but you worry that we shouldn't paint those comparisons with such a broad brush. There are also differences between the type of populism that you see in Hungary and what the United States is seeing with Donald Trump's base.

[Nick Thorpe]

Interestingly, you know, laws were passed in 2024, for example, to rein in the independence of the Hungarian national bank because it had been run by, by Mr. Orban's ally as a sort of private fiefdom by his man, George Matolci. But Matalchi himself came to get into more and more conflict with Mr. Orban. So he had to go. So here we have a situation in Hungary where In a way, Mr. Orban was happy to have an independent minded central bank doing policy, so long as those policy interests were chiming with his own.

[David Brancaccio (interviewer)]

I see these economic growth forecasts, when you subtract inflation, real growth, it's not rip roaring, as we Americans would say. I mean, I've seen between 8/10 of a percent and 1.8%.

[Nick Thorpe]

This is really because the Hungarian economy is very vulnerable. It's a very open economy. And this is a big contrast, I guess, with the United States economy. Hungary's really this government's really thrown all its eggs into the Chinese battery production market. Hungary is really gambling on the electric vehicles. And some of the more kind of cautious economic voices are saying, wait a minute, we don't even know how popular electric vehicles are going to be in a few years time.

[David Brancaccio (interviewer)]

That's nick Thorpe, the BBC's Central Europe correspondent. Nick, thank you for this.

[Nick Thorpe]

Thank you, David. Good to speak.

[David Brancaccio]

And that was Marketplace's David Brancaccio with that interview. I'm novasafo with the Marketplace morning report from APM American Public Media.

[Emily Hanford]

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[David Brancaccio (interviewer)]

Contract is cut, the study just dies.

[Emily Hanford]

It's all happening just as schools are trying to make use of research to improve reading instruction.

[Henry Epp]

There would not have been a Science of Reading without the federal funding.

[Nick Thorpe]

It wouldn't have happened.

[Emily Hanford]

I'm Emily Hanford. On our new episode of Sold A Story, what the Trump cuts mean for the science of Reading. Go to your podcast app and follow Sold A Story.