There seems to be peace and fundamental agreement between the Economy Minister and the MNB Governor

HUNGARY - In Brief 04 Sep 2025 by Istvan Racz

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This is something we have not seen for a long time, and especially not in the last almost two years of Mr. Matolcsy's period at the MNB. The domestic event of the week is the regular annual gathering of the Hungarian Economic Association, a high-profile conference where both Minister Nagy and Governor Varga (see them together on the picture below) have just spoken. Earlier today, we have reported on Mr. Nagy's comments on fiscal policy, but he also mentioned central bank policy. So, essentially Mr. Nagy assured the MNB about his support to the Bank's current conduct of policy, making no claim whatsoever that they should change their course, including on monetary policy and within that interest rates. In his own speech Mr. Varga spoke about a great variety of topics, including financial stability, protection against cyber fraud, the costs of banking charged to customers, the simplification of the administrative procedures of bank lending to enterprises (on which a new program has just been started), etc. But of course, he also mentioned monetary policy issues. On the latter, he said that the support of growth cannot be based on currency depreciation. As imports reach about 70% of GDP, forint strength makes a very substantial impact on inflation. The MNB currently think that a 1% move by the HUF exchange rate changes inflation by 0.3%, more than the much smaller amounts seen earlier. At present, households' perceived level of CPI-inflation is at 8%, too high to justify early monetary loosening. The MNB regards high inflationary expectations as the main factor holding back fixed investment, which in turn is the main reason why Hungary's economy has not grown over the last...