Magyar Nemzeti Bank Holds Interest Rate at 7.00%

The Magyar Nemzeti Bank held its central bank base rate unchanged at 7.00%.  The Bank said: "In the Council's judgement, the Hungarian economy is likely be stagnant next year, with growth expected to resume only in 2013. The level of output will remain below its potential over the entire forecast period. As the effects of the indirect tax increases and the exchange rate depreciation wane, the disinflationary impact of weak domestic demand is likely to become the dominant factor shaping inflation."

The Magyar Nemzeti Bank previously hiked the rate 50 basis points at its November and December meetings, after last raising it 25 basis points in January this year.  Hungary reported annual inflation of 3.9% in October, up from 3.6% in September and August, 3.1% in July, 3.5% in June, 3.9% in May, and 4.7% in April.  Hungary's Central Bank has a medium term inflation target of 3%, while the Bank said annual inflation for 2011 was 3.9 percent.

The Hungarian economy grew at an annual rate of 1.4% in the September quarter, 1.5% in the June quarter, compared to 2.4% in the march quarter, and 1.9% GDP growth recorded in the December quarter last year.  The Hungarian forint (HUF) has lost about 14% against the US dollar over the past year, the USDHUF exchange rate last traded around 230

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