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PM says there is no disagreement between gov’t and central bank on inflation target

Prime Minister Ferenc Gyurcsány said following a meeting with National Bank of Hungary (MNB) Governor András Simor and representatives of economic interest-groups and businesses on Friday that the government and the MNB think very alike in terms of Hungary’s inflation target.

“The magnitude and direction have been established and there is no reason for reevaluation,” Gyurcsány said. Gyurcsány commented that Hungary should establish its inflation targets with the aim of approaching the European Central Bank’s 2% goal over the medium-term, adding that some deviation from this target, which has until now been 1%, is naturally permissible. The government and the central bank will hold a consultation in the coming month designed to reach an agreement on the medium-term inflation target for the next period as the current agreement will expire in August.

MNB Governor András Simor told the press conference after the meeting with the prime minister that, in his view, the central bank can best contribute to economic growth through a monetary policy aimed at price stability. The Friday meeting was widely interpreted earlier as an attempt to persuade the central bank that its monetary policy should be subordinated more to the interest of economic growth, thus requiring an easing on the current tight monetary cycle.

Simor reiterated that the MNB has not and will not have an exchange-rate target, with developments in exchange rates seen just as one factor in the inflation trend. This could also mean that the MNB will resist all pressure to ease monetary policy in order to weaken the forint and thus reduce the adverse effect on competitiveness.

Prime Minister Gyurcsány said following the meeting on Friday that he, Simor and representatives from economic interest-groups and businesses agree that Hungary’s economy is on an accelerating growth path. Gyurcsány added that the objective is to further increase the pace of economic growth and decrease the inflation rate while maintaining social safeguards. In order to achieve these objectives, the government is pursuing responsible budgetary policies, simplifying the tax system, reducing bureaucratic and tax burdens as well as those encumbering enterprises and labor. (MTI-Econews)