He claims that the high rates are not justified by the foreign exchange rate of the forint, which he believes the central bank is unnecessarily worried about.

While the Ministry of Finance is looking to expand the powers of the central bank's supervisory board, amidst public disputes between György Matolcsy, the governor of the National Bank of Hungary (MNB), and Márton Nagy, the Minister for National Economy, Kisgergely has engaged in a professional exchange of opinions with the central bank experts on Portfolio.hu.

Like Nagy, Kisgergely is a former MNB executive, having served as the Managing Director responsible for financial institution supervision from 2013 to 2016.

His initial commentary was published at the end of January, which was followed by a response from central bank experts a month later. Kisgergely's counter-response took merely two days.

Not only Kisgergely but also Nagy and László Parragh, the president of the Hungarian Chamber of Commerce and Industry, have been regularly criticizing the central bank for maintaining excessively high real interest rates that far exceed the level of inflation, thus choking off lending. According to the central bank, high real interest rates are not an obstacle to increased lending because during the period of extremely high inflation, the real interest rate was deeply negative, yet lending activity did not surge.

Kisgergely argues that this is not a valid argument: in extraordinary times when inflation and nominal interest rates jump into the double-digit range, the real interest rate, which becomes more elusive and volatile, plays a lesser role in lending dynamics regardless of calculations. Beyond the uncertainty, the high nominal rates alone are intimidating, causing corporations and households to adopt a wait-and-see approach, which explains the lack of lending activity last year.

According to Kisgergely, based on previous research and international experiences from the past years, the equilibrium real interest rate in Hungary should be around 2 percent. "Comparing the current base interest rate of 9 percent with an inflation rate of 3.8 percent, we get a real interest rate of 5.2 percent, which is 3.2 percentage points above the equilibrium real interest rate. This shows a significantly restrictive monetary policy direction, last seen perhaps only during the crisis of 2009," he writes.

The central bank has argued that if the MNB had not raised the effective interest rate by 500 basis points in October 2022, the Hungarian economy would have plunged into a currency crisis. After declaring an end to the interest rate hiking cycle at 13 percent base rate, the central bank implemented a drastic 5 percentage point hike when the forint started plummeting. "I agree that the increased volatility in the days preceding the decision warranted intervention. However, could this not have been achieved with less damage to the real economy? At the end of February 2022, following the outbreak of the war, the Polish zloty plummeted. The Polish central bank calmly waited for the next regular interest rate meeting, at which it raised the benchmark rate by 75 basis points to 3.5 percent due to deteriorating inflation prospects, and handled the currency's fall with a verbal intervention that halted and reversed it," Kisgergely explains.

"The MNB believes that without a few hundred basis points premium over advanced currencies, the forint will start an uncontrollable plunge. This is not supported by neither theoretical nor practical examples," Kisgergely notes, indicating that protecting the forint's exchange rate does not justify the high level of interest rates currently maintained by the central bank.

Additionally, Kisgergely points out that in spite of the central bank's claims of not having an exchange rate target, the fluctuation or potential stability of the forint exchange rate is actually one of the key factors behind their decisions. He believes this fixation on the exchange rate is an old Hungarian trait that should be abandoned.