Central bank losses could be worked off within ten years - Deputy Governor
Zoltán Kurali, a Deputy Governor of the Hungarian central bank, appeared as a guest on the Della podcast, where he discussed the central bank's monetary policy and the current economic situation.
He emphasised that "without achieving and maintaining price stability, there can be no sustainable growth".
He added that the current inflation rate of 4.3% remains outside the acceptable range of 2–4%, and that without margin-limiting measures, inflation would actually be around 5.8%.
According to the central bank, (1) inflation must fall within the tolerance band, adjusted for margin-limiting measures, and (2) the MNB must be confident that the 3% target is both achievable and sustainable. These two conditions must be met for the central bank to 'test' the level of the real interest rate that would not pose a risk to financial stability.
With regard to the 6.5% base rate, Kurali emphasised that the real interest rate is in line with that of other countries in the region. He added that the domestic real interest rate, adjusted for government price measures, is equivalent to the real interest rates in the Czech Republic and Poland.
The Deputy Governor also spoke about the savings market. He said that a savings rate of 6% of GDP could be considered balanced. In his opinion, the 7% interest rate on retail government securities is competitive.
Kurali said that the current level of carry trade volumes is not a cause for concern, as they account for a maximum of 2% of GDP.
Regarding cooling inflation expectations, the Deputy Governor highlighted the importance of consistent and predictable economic policy. He believes that the Hungarian economy has not entered a state of stagflation.
Kurali believes that it is realistic to expect the central bank's losses to be cleared within 10 years.
Cover photo: Márton Mónus / Portfolio
