UPDATE - Rate decision was unanimous, says MNB governor

Analysis

The National Bank’s seven-member monetary council decided unanimously to keep key-interest on hold at 6% at its Tuesday-afternoon rate-setting session, National Bank of Hungary (MNB) Governor András Simor said at a press conference.

Simor noted that the council considered no alternative proposals to keeping the rate on hold.

The MNB governor remarked that inflation could dip to below 3% in Hungary by the end of 2012 even without raising interest rates.

Simor characterized Hungary's external-financing surplus as “the biggest positive change that has taken place since the onset of the global economic and financial crisis.” The surplus ─ which compares to a financing requirement of 7-8% of GDP before 2008 ─ lends stability to the forint, Simor added.

Simor commented that the capital and liquidity in Hungary's banking system are strong enough to meet the demands stemming from a possible strengthening of the Swiss franc, noting that the banking system passed stress tests that the MNB conducted in October 2010 at rates of HUF 245 to the Swiss franc at the end of 2011 and HUF 257 to the Swiss franc at the end of 2012.

He said the bank would administer another battery of stress tests in October of this year, adding that "we have no reason to believe at the moment that the banking system's resistance level is any lower than it was last October."

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