Hungarian Central Bank Keeps Interest Rates Unchanged: Government Pressures

Hungarian Central Bank Keeps Interest Rates Steady

The Hungarian Central Bank has decided to keep the policy interest rate at 6.5%, despite the government's calls for monetary expansion. The country has maintained its interest rates unchanged for 13 months, continuing to be among the highest borrowing cost countries in the European Union, alongside Romania.

Expectations of Economists

A recent Bloomberg survey conducted in the financial world revealed the common view of 22 economists that the Hungarian Central Bank would not change interest rates.

Government Pressures Increasing

Hungarian Prime Minister Viktor Orban and Finance Minister Marton Nagy contended in statements made at the beginning of October that the current interest rates are too high for an economy that is not showing growth, trying to influence the markets. The ruling party led by Orban is lagging behind in polls ahead of the upcoming April 2024 elections.

Central Bank's Strategy

Central Bank President Mihaly Varga emphasized that the bank needs to actively work on the exchange rate to support the local forint and keep inflation under control. Varga also pointed out that financial stability is a prerequisite for economic growth.

Inflation Concerns

As the annual inflation in September was above the central bank's target of 4%, the likelihood of the central bank lowering the policy interest rate this year is considered quite low in the markets.