Hungary’s central bank fights inflation: here’s how

In the current global economic climate, central banks can contribute most effectively to sustainable economic development by achieving price stability and maintaining financial market stability, the central bank governor said on Friday.

Although emerging markets are more sensitive to the volatile market environment, the Hungarian economy maintains its stability, Mihály Varga said after a meeting of European Union economic and finance ministers and central bank governors (ECOFIN) in Copenhagen, according to a statement by the National Bank of Hungary.

Varga said that household consumption, supported by dynamic wage growth, remained the basis for growth in the Hungarian economy. Restoring confidence and reviving the European economy were also key to boosting growth in the second half of the year, he added.

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Varga said that in order to stimulate corporate investment, the central bank had launched a qualified corporate loan, which, by mobilising the liquidity and capital surplus available in the banking system, provided easily accessible, forint-based funding for small and medium-sized companies’ investments.

Varga added that from an international perspective, it was clear that inflationary risks had not disappeared, and therefore a stability-oriented monetary policy was necessary to achieve price stability.

At the same time, he said Hungary’s financial stability could be seen in the forint exchange rate over the past few months, and the effect of the stable exchange rate was also reflected in purchase prices.

The simplification of the regulations of the supervisory authorities had also been discussed at the meeting, he said. Varga said the Hungarian central bank was monitoring developments and making proposals and comments through its active participation in the working groups and decision-making bodies in these authorities.

In order to simplify domestic regulations, cooperation between the National Bank of Hungary and the Regulated Activities Oversight Authority had been recently established, which would ease the burden on businesses by reducing administration, he added.

Featured image: illustration, depositphotos.com