The Monetary Council decided unanimously that caution is still warranted - Mihály Varga

The decision was unanimous

The Council confirmed that it remains committed to achieving its inflation target in a sustainable manner,

Mihály Varga stressed right at the beginning of the briefing.

The central bank continues to expect that the 3% inflation target will be achieved in a sustainable manner by early 2027, with exchange rate stability playing a key role in this. In the view of the Monetary Council, a cautious and patient monetary policy remains warranted.

The decision was unanimous, with no dissenting votes, the governor emphasized.

No surprises regarding inflation

The global economic environment remains uncertain, and global disinflation has slowed. Uncertainty persists regarding international growth prospects, with geopolitical tensions and trade policy measures playing a decisive role in this regard. As regards the Hungarian economy, the September inflation rate of 4.3% was in line with the MNB's expectations, but it remains above target, and consumer expectations remain high, said Varga.

What's new in the Hungarian economy?

Domestic real economic processes are characterized by duality: in August, retail trade expanded, while industrial and construction output declined. This duality can also be seen in lending processes, with household lending continuing to grow strongly, while corporate lending shows no sign of a significant turnaround. The support programs announced in recent months are taking place in an already active credit market, so retail lending may continue to expand, but the dynamics of corporate lending may remain subdued, said the governor of the MNB.

Deterioration in current account balance will be temporary

The current account surplus may temporarily decline in 2025, but with the entry of new export capacities, our external position may improve again in 2026, Varga pointed out.

The battle is not over

The underlying processes of inflation remain strong, but the strengthening of the forint this year is increasingly reflected in prices. He added that this is a welcome development, as the stronger forint is gradually being reflected in consumer prices.

The fight against inflation is not over yet,

the governor emphasized.

Maintaining the stability of the forint is essential

In recent months, we have seen a trend of strengthening in the forint, which is significant even in regional comparison. Looking ahead, a stable currency market is needed to achieve price stability, and developments in recent months provide a good basis for this, but money market developments must be monitored continuously.

Stability is a value that brings us closer to achieving our primary goal of price stability,

Varga highlighted.

No pressure on the central bank

I don't feel any pressure on the central bank that would divert us from the decisions we have made so far,

said Mihály Varga, reflecting on the government's statements in recent weeks.

What they take into account is what has been decided

We always start from what is known, from facts, data, or decisions. The government decided in the summer to maintain the margin cap until the end of November, so in the current situation, we have no choice but to wait for the next decision, says Varga regarding margin caps.

Is the market right in thinking that a cut could come at the beginning of the year?

We follow and monitor investor expectations and market analyses, but we basically make decisions based on our own data. We would like investors to understand why we do what we do, but they must accept that the most important goal of monetary policy is to achieve and maintain price stability, and we must make our decisions based on this, Varga responded to market expectations.

Do they need any more gold?

"We are currently reviewing our reserve rules, but

at this point I do not believe that we should further increase the role of gold in our reserves, as it is already high by international standards.

Forint appreciation is not a goal, but a positive consequence

Every month, we make complex decisions in which inflation plays a key role, but we also take many other factors into account, said the governor of the MNB regarding the background to the decisions. The central bank has an inflation target, and our most important goal is to achieve and maintain price stability. "What happens on the foreign exchange market is not a goal, but a positive consequence of our monetary policy."

Euro adoption is off the table for two reasons

The introduction of the euro is not currently on the table for two reasons: firstly, the Hungarian economy does not currently meet the conditions for this, and secondly, based on the prime minister's recent statement, there is no will to do so. If a country wants to introduce the single currency, this can only be achieved through close monetary and fiscal cooperation. The current goal is to meet the conditions, and then we can talk about whether there is the will to join, said Mihály Varga.

Cover photo (for illustration purposes only): Portfolio