Sustained easing of inflation would presage interest rate reduction

If inflation starts dropping soon, and sustainably, interest rates can be eased, paving the way for a rapid economic turnaround based on green technologies, György Matolcsy, the governor of Hungary’s central bank, said on Thursday.

At a meeting with the head of the competition office (GVH) on Thursday, Matolcsy said the central bank (NBH) would do everything possible to restore and preserve price stability.

The competition office is well placed to support the swift restoration of price and financial stability, according to an NBH statement.

Matolcsy said doing so was a “national strategic interest” since inflation was weighing on the country’s growth, among other influences.

The central bank has found that businesses were quick last year to pass on rising costs to consumers, the statement said. A prime objective is to ensure that the current downward trend in raw material prices is reflected in consumer prices just as quickly, it added.

Product and service repricing has been intensive in recent years, and the competition office can help to ensure that the rate of inflation is set on a declining path, Matolcsy said.

GVH head Balázs Csaba Rigó said the various branches of economic policymaking must be in lockstep on reducing inflation, and the competition office was using all the tools of competition regulation towards this goal.

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Source: MTI