Monetary policy is set to shift towards a more hawkish stance as early as June, with a possible hike in the base rate, György Matolcsy, the governor of the National Bank of Hungary (NBH), told a conference. A persistent rise in inflation would endanger the recovery, he said. The Hungarian economy can withstand a rate hike, the governor said, adding that given the risk to the economy posed by inflation, the Monetary Council is compelled to raise interest rates.
Finance Minister Mihály Varga said that inflation was expected to stabilise around 3%, coming down from the currently “temporary” high rate. Hungary’s economy protection action plan amounted to 30% of GDP, Varga said, adding that more than 4,000 billion forints (EUR 11.5bn) of that has been spent on investments. The economy became more resilient to the fallout of the pandemic by the first quarter of 2021, gaining an edge over other EU member states, Varga said. The rebound is also expected to be swifter, possibly in the second half of this year, he added. The minister noted the budget deficit had shrunk considerably in 2021, adding that it would return to the 3% Maastricht norm by 2024. Hungary’s fiscal policy, he added, supported sustainable growth. The conference “Relaunching Hungary” was organised by the business daily Világgazdaság.