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Benchmark rate hike damper on growth, says economy ministry

A decision on Tuesday by the National Bank of Hungary’s Monetary Council to raise the central bank’s key rate by 50bp to 7.00% will hold back healthy economic growth in Hungary, the National Economy Ministry said.

The ministry said the decision goes against trends in other European Union countries, in which central banks are cutting interest rates. It especially affects domestic SMEs unfavourably, increasing their competitive disadvantage and holding back their growth as well as growth of the economy as a whole, it added.

The ministry noted that National Economy Minister Gyorgy Matolcsy had earlier consulted with MNB governor Andras Simor on monetary policy tools that could support a pickup in economic growth, similar to those used by the European Central Bank, the Federal Reserve or the Bank of England.