BUDAPEST: Hungary's central bank must not raise its inflation target and the country should work towards cutting inflation to secure the lower interest rates it needs, Prime Minister Viktor Orban said on Saturday.
"Inflation indeed must be kept in check and must be lowered," Orban told a news conference. "If inflation is higher we cannot lower interest rates - and we need lower interest rates."
"The inflation target must not be raised and I warn everyone not to write anything like that," he said when asked whether reports that the government eyed a higher inflation target to allow looser monetary policy were true. "That is not true."
He also said that impending changes to the central bank's rate-setting Monetary Council must not involve doing anythinig radical, adding that the changes would probably have a beneficial effect on the country's forint currency.
He added he supported the Economy Minister's proposal on Friday to create a 250 billion forint ($1.26 billion) stability reserve fund in the 2011 budget in order to avoid negative effects of potential market volatility in Europe.
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