Monetary tightening to continue in 2022, says central bank govenor Matolcsy

The cycle of interest rate raises started in June will continue in 2022, as long as it is necessary to bring the inflationary outlook back down close to the 3 percent target in a sustainable manner, central bank governor György Matolcsy said in an interview with daily Magyar Nemzet published on Monday.

Matolcsy noted that the NBH’s one-week depo rate is currently above the central bank’s base rate but by the first half of 2022, the base rate will catch up to the one-week depo rate.

He said

the central bank had begun the fight to restore price stability in time; the next step must be to restore fiscal balance.

The central bank governor welcomed government moves taken in recent weeks concerning this year’s and next year’s budget, adding that the process needs to be taken forward and a deficit of below 3 percent must be targeted as soon as possible.

In an economy moving on a converging path, instead of indebtedness, sources of sustainable growth need to be found in boosting productivity, institutional reforms, and a green and digital transformation, Matolcsy said.