Whatever their stripe, Hungarian governments have demonstrated a habit of loosening the purse strings ahead of national elections, and the Fidesz-Christian Democratic alliance that Viktor Orbán heads has certainly not been shy of doing the same this time round. Amid the pay rises, tax breaks and cheap loans, there have even been unspecified hints at a possible 14th-month pension payment, as if the current 13 were not enough. If it comes to anything, it would doubtless be dressed up as looking after those who have already contributed to Hungary’s greater good at a time of geopolitical and economic uncertainty. (Parliament decided as recently as Oct. 21 to back a Ministry of Justice proposal to prolong the official state of emergency by 180 days until May 13, 2026, citing the war and humanitarian crisis in Ukraine and its impact on the European economy.) Be that as it may, and call me a cynic if you like, but pensioners as a block tend to be much more active and reliable voters than their younger counterparts.
What makes the tension between the government and the national bank so interesting is that, for all that the MNB is an independent organization, the appointment of the governor is blatantly political, Fidesz using its parliamentary majority to push through a candidate it believes will be supportive. Thus, we had György Matolcsy, who Orbán famously once described as his “right hand.” Matolcsy had a flair for the unorthodox, but his relationship with the government seemed to cool over time. When his second six-year term of office expired, he was replaced by another former finance minister, Mihály Varga. Like his predecessor, Varga has occasionally and specifically seemed to be at odds with the government’s economic point man, Minister for National Economy Márton Nagy, such as when the latter told a conference that the Hungarian real interest rate is too high.
Varga has been much keener to maintain the value of the forint than Matolcsy ever appeared to be, and has consistently spoken of the need for a strict and cautious monetary policy. Indeed, he did precisely that at the press conference that followed the latest rate-setting meeting of the Monetary Council of the MNB, where the rate was held at 6.5%, the point at which it has sat for than a year now. Incidentally, that is another difference between the governors: Varga attends the press conferences, at least for now; Matolcsy rarely did.
Like businesses, the markets appreciate stability. They also seem to have taken to Varga’s consistency of approach. Nagy may have wanted a rate cut, but few, if any, analysts saw the room for one. The tension between the government and the central bank will surely only grow between now and the spring. As the pressure mounts, Varga may find it harder to maintain his fiscal rules. The money markets will be watching closely.
Robin Marshall
Editor-in-chief
This editorial was first published in the Budapest Business Journal print issue of October 31, 2025.
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