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MNB communication evasive on exchange rate

The central bank aims primarily at price stability, taking decisions based on several factors in order to ensure this, including the exchange rate and its increased volatility, the deputy governor of the National Bank of Hungary (MNB) told a parliamentary committee Monday. The forint weakened to a historic low of 330.69 against the euro in the afternoon.

Márton Nagy, deputy governor of the National Bank of Hungary.

Responding Monday to questions addressed by MPs, MNB Deputy Governor Márton Nagy noted that the "sole anchor" of the central bank is inflation. Maintaining price stability means 3% inflation, he said, as cited by business and economic news site

"The MNB takes into consideration the time horizon of monetary policy, all factors which influence inflation. Such factors may be the evolution of raw materials, the changing of the external inflation environment, the labor market, the situation of the real economy, the exchange rate, or conditions on the credit market," Nagy said.

Responding to the question of whether the MNB will intervene in the exchange rate through communication or a base rate raise, Nagy noted that the exchange rate depends on market processes and the market has many factors, such as exports, imports and investors, which all shape the exchange rate.

As for the recent rise in fuel prices, Nagy said that this is due to a rise in petrol prices on international markets and the strengthening of the U.S. dollar against the euro.

Meanwhile, construction material prices have started rising, business daily Világgazdaság reported. By mid-July, some sanitary and bathroom tiles imported from Western Europe will become more expensive, due to the weakening of the forint. If the exchange rate of the forint remains at around 330 against the euro, all prices of construction materials will start rising within one or two months, beginning with imported materials, the paper noted.