Central bank and FinMin discuss inflation targets

Analysis

The central bank (MNB) and the Finance Ministry will start talks on the method for assessing the joint government-central bank inflation target, MNB and the Finance Ministry said in a statement late on Wednesday.

The statement followed a response to a question on Monday by MNB governor András Simor, who said Hungary’s mid-term inflation target of 3% is a single point, not a range. He responded to a question about the way the bank would assess its inflation target in light of the scale of external factors affecting consumer prices in Hungary.

When the Finance Ministry and MNB set the mid-term inflation target in August 2005, they said in a statement that the target was “a value of 3% as calculated by the Central Statistical Office’s (KSH) consumer price index.” However, the statement also said “when assessing the achievement of the inflation target, big changes resulting from unexpected effects must be taken into account. For this reason, the government and the central bank agree that CPI of +/-1 percentage point from the 3* target is acceptable from the view of price stability.” Monetary Council member Gábor Oblath explained to portfolio.hu on Thursday, that the MNB’s forward-looking (ex ante) mid-term inflation target is a single point: 3%. The tolerance range serves only for assessing later (ex post) whether the target has been met. (MTI–Econews)

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