Orbán Set to Announce New Hungarian Central Bank Chief as Matolcsy’s Term Ends

Prime Minister Viktor Orbán is poised to announce his choice for the next governor of the Hungarian National Bank (MNB) within days, as the tenure of the current chief, György Matolcsy, draws to a close. The selection process, which will also coincide with a cabinet reshuffle, is being closely watched amid economic turbulence and a weakening national currency.

Matolcsy, who has led the central bank since 2013, will see his mandate end on March 1, 2025. The prime minister is widely expected to decide between Finance Minister Mihály Varga and Economy Minister Márton Nagy for the top monetary policy role. "I think we only have to wait a few days for the announcement of the names," Nagy said in a television interview earlier this week.

Varga has been the leading candidate to succeed Matolcsy, following Orbán’s announcement to merge the finance and economy portfolios. Analysts believe that Varga will be tapped as the next central bank governor, while Nagy, a close economic adviser to Orbán, is expected to head the newly combined “superministry” for economic policy.

Nagy’s new role could provide him with an opportunity to address previously missed economic growth targets, while Varga’s move to the central bank would come at a critical juncture.

The next MNB governor will face a daunting task: balancing efforts to rein in inflation while stabilizing the forint, one of the most volatile currencies in emerging markets. The forint recently fell to its lowest level against the euro since December 2022, trading 0.7% lower at 413.2 per euro on Wednesday. Meanwhile, Hungary’s economy is in recession, adding pressure ahead of the 2026 parliamentary elections.

Matolcsy’s term has been marked by public clashes with Orbán over economic policy. The central bank has criticized government-imposed price and interest rate caps, arguing that they undermine the bank’s independence and contribute to inflation.

The forint’s weakness has already forced the central bank to halt monetary easing in recent months, keeping the key interest rate at 6.5%. Nagy hinted in an interview that rates could “hopefully” be lowered, noting that the key rate is currently running more than 3% above inflation, which he called “not justifiable.”

Market observers fear Orbán’s next appointee may face mounting government pressure. Tatha Ghose, an analyst at Commerzbank AG, warned that Orbán’s influence over monetary policy could lead to sudden and significant rate cuts, regardless of inflation trends.

Such concerns are not without basis. Earlier this week, Nagy suggested that cooperation between the government and the central bank would be “stronger” under the new governor. This has fueled speculation that Orbán’s administration is eager to accelerate rate cuts to stimulate the economy ahead of elections.

Despite its recent decline, the forint’s weakness may attract buyers. Analysts at JPMorgan Chase & Co. have recommended a tactical purchase of the currency against the dollar, arguing it is oversold after falling around 9% this quarter - outpacing declines in neighboring currencies like the Polish zloty and Czech koruna.

The looming decision will not only set the tone for Hungary’s monetary policy but also determine how the government navigates economic recovery in the face of global and domestic challenges. With inflation still a key concern and political pressures mounting, the new central bank governor will undoubtedly have a significant role to play in shaping Hungary’s financial future.