At a Euromoney conference in Vienna, Nagy said that if core inflation excluding tax effects exceeds the Central Bank’s 3 percent target, that would be “sufficient evidence for the MNB to start tightening its monetary policy.
The comments were especially important because the MNB has kept its base rate at a historic low of 0.9 percent since May 2016. In reaction, the forint rose to 317.85 against the euro, while in previous months it hovered above 320. Against the dollar, the forint also rose to 279.54.
Last week, the Central Statistics Office (KSH) released its latest inflation data, which showed a core inflation of 2.8 percent or – adjusted for tax effects – 2.9 percent, which is just 0.1 percentage point below the 3 percent threshold mentioned by Nagy.
Nagy also said that the main goal of the MNB is to steadily keep inflation within its target range, saying that “market participants will certainly understand that”. This was also in line with a December change in the Central Bank’s communication strategy when analysts pointed out that it signals the end of a loose monetary policy.