The European Commission expects Hungarian inflation to fall to 4 percent next year.Continue reading
The Monetary Council of the Central Bank (MNB) started normalizing monetary policy on Tuesday, György Matolcsy said, after the Monetary Council tightened the interest rate corridor by 100 basis points to 17 percent. The central bank governor welcomed the government’s decision to start fighting inflation after a year and a half, saying next year’s budget is “a promise” to do so.
In an online press conference following the interest rate decision, the central bank governor stressed that disinflation, meaning the decline in inflation, began after inflation peaked. After the twin deficits of the past two years, the stability of domestic financial markets has recently improved sustainably and significantly due to external and internal factors, and there are no inflationary pressures as before. He added that
a cut in the key interest rate is unlikely to be discussed in the foreseeable future.
Inflation is an enemy of the state because it both disturbs the balance and slows down growth, György Matolcsy stressed. Lowering inflation remains a top priority, he said, as the inflation rate remains high at 24 percent, 10 percent above the regional average. The outlier could be explained by the government deficit and imbalance, which he described as a specific Hungarian cause. Inflation is mainly found in food and fuel prices, possibly caused by price freezes, as the inflation figure for early 2023 was three to four percent higher due to price caps, the central bank president said. He added that
it is proposed to the government to abolish price freezes as soon as possible.
According to the president, there is a debate in the world about price caps. These measures interfere with price formation in a market economy environment. There is evidence that inflation is higher where productivity is low, and competitiveness is weak. He explained that
a turnaround in competitiveness and productivity is needed, which the central bank has repeatedly emphasized.
He added that it is moving in the right direction and supports the government in every way because only together can we be successful. According to Matolcsy, next year’s budget is a “good promise” for this.
via mti.hu, Featured photo: Pexels