Central Bank Governor Criticises Gov't Policy
MNB governor György Matolcsy
Photo by Attila Kovács/MTI
National Bank of Hungary (MNB) governor György Matolcsy called out the government for implementing policy measures that have fueled inflation, addressing lawmakers in parliament on Wednesday, state news wire MTI reports.
Presenting the central bank's 2021 annual report, Matolcsy noted that the MNB's analyses had pointed, already early in 2021, to a return of "persistent and persistently high" inflation.
While the central bank adopted a policy pivot, "stepping on the brakes, as required, the government stepped on the gas", he added.
Matolcsy acknowledged the earlier successes of government policy, restoring fiscal balance, rolling out a new tax system, and setting a goal to create 1 million jobs in under 10 years, but said the government "lost its way" in 2021 and continued down the same path in 2022 as balances deteriorated.
He said Hungary faces two "great challenges": inflation and convergence. He added that while Hungary passed many countries on the path to convergence until 2019, it has been overtaken by a number of countries since then.
Matolcsy chided the government for failing to adopt reforms recommended by the central bank and said sustainable growth requires such reforms.
He brushed off speculation that he has "had a row with the prime minister" and is "offended and frustrated", but acknowledged a "disagreement in principle" between the government and the central bank.
MNB deputy governor Barnabas Virág said all elements of economic policy should be "subordinate" to bringing down inflation as high CPI hinders growth and the chance for economic convergence. He also pointed to the need for a disciplined and tight monetary policy.
He stressed the importance of taking measures against raising consumer prices faster than the increase in producer costs and said that practice added as much as three percentage points to headline inflation in the second half of 2022.
Virág said tight monetary policy would have a similar effect on home prices as on inflation and augured a halt to the fast home price increases seen in the past 4-6 years.
SUPPORT THE BUDAPEST BUSINESS JOURNAL
Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.