Hungary's incoming central bank governor pledged to uphold the institution's independence, aiming to reassure investors about the future of monetary policy amid potential government influence.

Finance minister Mihaly Varga, who was nominated by Prime Minister Viktor Orban last month to lead the National Bank of Hungary, stated that the central bank's 3% inflation target was suitable, resisting previous suggestions within the cabinet to increase it for the sake of a more relaxed monetary policy.

“Reaching and maintaining the 3% inflation target is the priority. Central bank steps will be decided with a view to stability and accounting for the money- and capital-market environment,” Varga said on Monday during a parliamentary confirmation hearing.

Varga is set to take over as central bank governor in March, following the end of Governor Gyorgy Matolcsy’s second and final six-year term. Matolcsy, a former ally of Orban, has become a strong critic of economic policy, especially regarding the unchecked spending that has made the Forint one of the most vulnerable currencies.

Investors are watching closely for signs that Varga may align with Orban’s government once he takes office, possibly implementing interest rate cuts to revive an economy in recession. Pressure could increase with Orban’s Fidesz party, which has been in power since 2010, trailing in polls ahead of the 2026 elections, Bloomberg reports.

Varga adhered to a market-friendly stance, referencing central bank law, which prioritises achieving the inflation target and permits collaboration with the government to boost economic growth only if it doesn't compromise financial stability. 

He stated that it was too early to discuss specific interest rate actions months before assuming leadership of the bank, and emphasised that he would aim to avoid public policy disputes once in office.

The Forint edged up by less than 0.1% to 408.4 against the Euro following Varga’s hearing, continuing its recovery from a two-year low near 415 in late November.

The Forint’s weakness, down 6% against the Euro and nearly 11% against the Dollar this year, has prompted the central bank to halt monetary easing.

Despite the ongoing recession and headline price growth remaining within the central bank's one-percentage-point tolerance band around the 3% inflation target, it has refrained from introducing further stimulus.