Key insights
- Hungary's central bank governor suggests the primary budget deficit may widen, emphasizing deficit control and maintaining positive real interest rates to manage inflation. While the Iran conflict poses inflation risks, a stronger forint and fuel price caps offer some containment. The incoming government's economic policies will significantly influence the inflation outlook. Household consumption, supported by government measures, is expected to drive economic growth. Limited direct impact on US equities, but rising European inflation could indirectly affect global risk sentiment.
Investing.com -- Hungary’s primary budget deficit could widen this year from 0.9% of economic output in 2025, central bank Governor Mihaly Varga said on Tuesday, emphasizing the need to keep the deficit under control.
Speaking at a business conference organized by financial news website portfolio.hu, Varga said the central bank will maintain a positive real interest rate to keep inflation risks under control. The central bank left its base rate unchanged at 6.25% last month.
Varga stated that economic fundamentals are stronger than at the start of 2022. He noted that the Iran conflict boosts inflation risks, but a stronger forint and the fuel price cap help contain price growth.
The governor said economic policy measures of the incoming government will be another key factor for the inflation outlook. He added that household consumption is expected to remain a key driver of economic growth, supported by government measures.
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