UPDATE - National Bank of Hungary leaves rates on hold

The Monetary Council of the National Bank of Hungary (MNB) voted to keep the central bank's key rate on hold at 6.00% at a meeting on Tuesday, the MNB said.

Council members kept the base rate on hold for the eight month in a row.

The decision was in line with market expectations, though some analysts had said a sharp weakening of the forint in recent days could prompt a rate rise.

The forint firmed from 291.50 to 290.50 to the euro immediately after the decision was announced.

Speaking at a press conference after the meeting, MNB governor Andras Simor said two proposals were made at the meeting: one to keep the base rate on hold and the other to raise it by 25bp. The first proposal got an "overwhelming majority" of the vote, he added.

"Uncertainty in financial markets warrants a wait-and-see policy stance," the Council said in a statement after the meeting. "In the Council's judgment, increased volatility in financial markets observed recently may persist for some time," it added.

 "Risk premiums have risen in the past month and the forint exchange rate has weakened. The increase in perceptions of the risks associated with the Hungarian economy was mainly accounted for by the deteriorating outlook for global growth and the protracted debt crisis of the euro area," the Council said.

It added that a government scheme allowing early repayment of foreign currency-denominated mortgages at a fixed rate, discounted from the market rate, "represents a significant source of uncertainty in terms of Hungary's risk perceptions".

The condensed minute of the meeting will be published at 2pm on October 5.