Varga Mihály has delivered his first public address since assuming office as the President of the Magyar Nemzeti Bank (MNB) on March 4, 2025. His remarks were made during the Economic Opening of 2025 event organized by the Hungarian Chamber of Commerce and Industry.

In his speech, Varga acknowledged the significant slowdown in the global economy throughout the 2020s but indicated that there remains potential for growth.

Varga emphasized the persistent issue of inflation, noting a recent uptick in inflation rates within many OECD member states.

He highlighted expected increases in public spending across Europe, driven by a €800 billion boost in defense expenditures over the next four years by the European Union, alongside planned investments in infrastructure.

Specifically, he referenced Germany's proposed €500 billion fund as a critical component of this trend.

Regarding the financing of increased government expenditures, Varga pointed out a general rise in government bond yields, signaling a common trend across various nations.

He cautioned that the rapidly changing external factors affecting the economy necessitate a cautious approach.

On the subject of Hungary's economic growth, Varga stated that preliminary data from the fourth quarter of 2024 indicates a return to a growth trajectory, and he expressed a commitment to sustaining this momentum throughout the current year.

He identified strong consumer spending as a stabilizing foundation for the domestic economy.

Although investment activity declined in 2024 due to high energy prices and demand uncertainties, there are optimistic projections for recovery in this area as the year progresses.

The President also addressed inflation trends, noting that while 2023 saw a rapid and significant reduction in inflation, medium-term forecasts remain uncertain.

He attributed a substantial portion of inflation to pricing pressures in market services, which persist at elevated levels.

Varga characterized this as a warning signal for the central bank, asserting that it will be necessary to investigate the underlying causes.

"A disciplined anti-inflation economic policy remains essential," Varga stated, underlining the necessity for continued efforts to reduce inflation swiftly and ensure price stability, which he considers vital for sparking economic growth.

He summarized that ensuring price stability is key to achieving the objectives set for 2025.

Since his appointment, Varga Mihály’s leadership has generated cautious optimism among key economic stakeholders who regard him as potentially well-suited for the role, basing this on his background and capabilities.

Nevertheless, it is anticipated that he must navigate the complexities of maintaining an independent central banking role, particularly given his previous tenure as a subordinate to Prime Minister Viktor Orbán. Observers note that a transition in the political landscape could occur by the time of the 2026 elections, adding further significance to Varga's leadership period.

The central bank's substantial accumulated losses raise additional concerns among analysts, who observe a potential overlap between monetary and fiscal responsibilities.

The Hungarian government has utilized the central bank for inexpensive financing, leading to a situation where the MNB has lent at low rates while simultaneously charging significant interest rates, creating large deficits.

Analysts indicate that revitalizing the economy should primarily be the government's responsibility.

The government is expected to maintain a pro-growth stance while advocating for looser monetary conditions.

Varga faces the challenge of balancing these expectations with his own convictions, particularly if lower interest rates—potentially leading to currency depreciation and increased inflation—conflict with the broader objectives of economic stability.

Such inflationary pressures could pose significant challenges for the ruling party in the lead-up to elections.