"Hungary is committed to its disinflation path and does not want inflation to be stuck at high levels," Prime Minister Ferenc Gyurcsány told a joint press conference with central bank (NBH) Governor on Friday.He said the parties at today's talks agreed that “Hungary is on a rising growth path" and they would like to achieve that “growth would materialise amidst decreasing inflation", maintaining the balance of the budget.
“What the government can do to this end is that it keeps pursuing a responsible fiscal policy," the PM said, also confirming his previous indication that the country's public sector deficit would be smaller than set in the Convergence Programme both this year and next (4.0% and 3.2% of GDP).
NBH Governor András Simor said price stability, which is the key target of the central bank, serves economic growth, adding that today's meeting was the first step in efforts to achieve disinflation at the lowest costs possible.
The aim of today's negotiations was to determine how monetary policy may support the cabinet in its endeavours to foster growth, which is now the foremost priority of economic policy.
What about the new inflation target?
Simor said today they have not addressed Hungary's future euro adoption and only touched upon the pending review of the medium-term inflation target.
He noted, though, that consultations on the latter will continue over the next month.
The government and the central bank are bound by law to renew an agreement about Hungary's medium-term inflation target (currently 3.0%) every three years, the next time this August.
To a question about a possible raise of the current CPI goal (3.0%), the PM said “the stance of the cabinet and the central bank on the inflation target is very similar". “There is no disagreement between us about the need to set an unambiguous target."
Previously, there have been a disagreement and some misinterpretation involved about the target, with some believing the +/-1% ex post “tolerance range" is in fact a range target, while Hungary actually has a point target at 3.0%.
“The central bank and the government agree that in the medium term we should approximate the targets set by the ECB" (European Central Bank), while there can be some difference," Gyurcsány said.
“We believe the magnitude and directions are given and they do not require a revision," he added."
Source: Portfolio Online Financial Journal
14.07.2008