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Feb CPI marginally lower at 25.4%, as expected
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Cbank Governor calls on government to aid inflation fight
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Cutting inflation into single digits by end-2023 a 'tough
job'
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Matolcsy: 'very disciplined and tight' policy still needed
(Releads, updates with comments from deputy governor)
By Gergely Szakacs
BUDAPEST, March 8 (Reuters) - Hungary's central bank
doubled down on a "very disciplined and tight" monetary policy
and its governor called on Prime Minister Viktor Orban's
government to aid the inflation fight after February data on
Wednesday showed inflation still exceeding 25%.
A policy clash between Orban, who has ruled Hungary since
2010, and Governor Gyorgy Matolcsy, his former economy minister,
came to the fore on Wednesday, with Matolcsy voicing new
criticism of Orban's handling of the inflation crisis.
Warning that Hungary faced risks from rising debt servicing
costs and slower convergence towards western European income
levels, Matolcsy said Orban had ignored several pleas from the
bank in the past years for reforms to boost competitiveness,
which he called a missed opportunity.
"In the past decade, Hungary had clear objectives. To create
a million new jobs. Now it has none," Matolcsy told parliament.
"When I politely, but tactfully, but still resolutely asked
the prime minister to define a measurable objective for the next
decade, he told me: if I measure, I lose. He was wrong. If you
do not measure, you definitely lose," Matolcsy said.
Orban's press chief did not immediately respond to an
emailed request for comment.
Hungarian inflation slowed for the first time since mid-2021
in February, although only by a touch as the headline rate
stayed above 25%, giving the central bank no reason to relax its
policy.
The bank left interest rates unchanged last week, as
expected, and said it would tighten liquidity conditions
further, defying government pressure to cut borrowing costs amid
a sharp economic slowdown.
"Is the central bank governor offended? Is he frustrated?
Has he fallen out with the prime minister? No. God forbid. There
is a disagreement in principle between the government and the
central bank," Matolcsy told parliament.
"The National Bank of Hungary must fight against inflation
and we ask the government's help in this effort," Matolcsy said.
'SLAMMING THE BREAKS AND PUSHING ACCELERATOR'
The European Commission projects Hungary's headline
inflation rate at 16.4% this year, the highest in the European
Union, boosted by food prices surging nearly 50% in January and
double-digit rises in services and energy prices.
Matolcsy, once dubbed by Orban as his "right hand," said a
rift between the central bank and the government emerged in 2021
as inflation started rising, with the bank "slamming on the
brakes," while the government "pushed the accelerator".
Matolcsy said all price caps still in place, including those
on some basic foods, should have been scrapped as of the start
of the year as they have added some 3% to 4% to inflation, with
the 2023 budget still compounding inflationary pressures.
Deputy Governor Barnabas Virag later told lawmakers that the
bank aimed to wrestle down inflation as fast as possible to a
"low range" near its 3% target, adding that tight policy was
also needed to preserve financial stability.
Virag said Hungary would have a "tough job" bringing
inflation back to single digits by the end of the year.
(Reporting by Gergely Szakacs
Editing by Christina Fincher and Tomasz Janowski)
