BUDAPEST — Hungary’s inflation could start declining around February-March and drop to a single-digit rate by December in annual terms, Prime Minister Viktor Orban told state radio on Friday.
“I expect that around February-March this inflation fever will start declining,” Orban said, adding that inflation was a “public enemy” and must be curbed.
Orban, reelected for a fourth consecutive term in April 2022, faces the toughest economic challenge of his rule this year, as his government tries to avoid economic recession at a time when inflation is still running well above 20%.
Central banks across Central Europe are seeking to end their policy tightening as economies slow sharply. The National Bank of Hungary adopted a wait-and-see mode on Tuesday as inflation, which was running at 24.5% in December, is still seen edging higher before it starts declining.
The central bank left its base rate at 13% and said it would keep its one-day deposit rate at 18% until it sees “a trend improvement” in risk assessment and would use instruments it introduced last year to absorb interbank liquidity on a long-term basis.
Orban did not comment about the central bank.
But on Thursday, Orban’s Minister for Economic Development Marton Nagy was critical, saying that while the government “respected the central bank’s independence” the 18% deposit rate was one of the highest in the world.
“If inflation indeed falls to single digit by the end of the year, the current forward looking interest rate level includes a more than 5% real interest rate for one year ahead, even though we reckon with 1.5% GDP growth. This level cannot be justified from the aspect of the economy,” Nagy told the weekly Mandiner newspaper. He said the high central bank rate and increased capital requirements for banks threatened to halt lending.
“Without lending there is no economic growth, and the NBH had shared this thinking before,” Nagy was cited as saying. (Reporting by Krisztina Than Editing by Mark Potter and Frank Jack Daniel)