Published by Global Banking & Finance Review®
Posted on March 4, 2025
2 min readLast updated: January 25, 2026
Add as preferred source on GoogleMihaly Varga, an ally of Orban, becomes Hungary's central bank governor amid inflation and growth risks, pledging independent policy ahead of elections.
By Gergely Szakacs
BUDAPEST (Reuters) - Former Hungarian finance minister Mihaly Varga took over as central bank governor on Tuesday, pledging an independent policy course amid a strong rebound in inflation and growing threats to economic growth.
In November, Prime Minister Viktor Orban nominated Varga to succeed outgoing Governor Gyorgy Matolcsy, turning to an ally as he seeks to revive the economy ahead of a 2026 national election, which will pit him against a surging opposition rival.
In power since 2010, Orban has struggled to drag Hungary out of an inflation-led downturn following Russia's 2022 invasion of Ukraine, with the economy barely growing last year after a 2023 recession, data showed on Tuesday.
Inflation meanwhile is back on the rise, rebounding to the European Union's highest level of 5.7% in January based on Eurostat figures. It follows forint's sharp losses late last year and government tax hikes to curb a chronic budget deficit.
The inflation rise has forced the National Bank of Hungary (NBH) to pause interest rate cuts and prompted economists to pare bets on how much rates could come down this year from current 6.5%, EU's joint highest level.
"The main objective of the (NBH) is to reach and maintain price stability," the central bank said in a summary of Varga's remarks following his appointment by Hungary's president.
"In accordance with this, we will firmly respond to any risk threatening the inflation target, financial stability and sustainable economic development."
Varga has sought to allay worries that the bank might bow to government pressure for rate cuts. He will chair his first rate-setting meeting on March 25, when the bank is scheduled to issue a quarterly forecast update.
With growth already seen falling short of Orban's 3.4% target, central Europe's export-reliant economies face additional pressure from possible U.S. tariffs on the EU.
The January inflation surge prompted analysts to raise their forecasts for average 2025 inflation to 4.9% from 4.2%, while slashing their economic growth forecast to 2%, an uncomfortable mix for Orban as he gears up for next year's elections.
(Reporting by Gergely Szakacs; Editing by Tomasz Janowski)
Former Hungarian finance minister Mihaly Varga took over as central bank governor on Tuesday.
Inflation rebounded to 5.7% in January, the highest level in the European Union.
Hungary is struggling with an inflation-led downturn and growth that fell short of targets, compounded by external pressures like potential U.S. tariffs.
Varga aims to reach and maintain price stability while responding firmly to risks threatening inflation targets and financial stability.
Varga will chair his first rate-setting meeting on March 25, when the bank is expected to issue a quarterly report.
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