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Gov't believes rate hike unjustified

The government believes a decision on Monday by the National Bank of Hungary's Monetary Council was unjustified in light of economic trends and the general government balance, the National Economy Ministry told MTI.

MNB rate-setters voted almost unanimously to raise the key rate by 25bp to 5.50%. The Monetary Council explained the first rate rise since the autumn of 2008 citing upside risks to inflation and increased risk perceptions because of global and country specific factors, "particularly...a decline in the predictability of the economic environment".

The ministry said Hungary's economy was expected to grow 1% in 2010, compared to a 0.9% contraction projected when the 2010 budget was drafted last year. Hungary will certainly meet its 3.8%-of-GDP general government deficit target for 2010, it added.

In 2011-2013, gradually improving economic growth, expanding employment, rising investments and the start of structural reforms by the government will establish the conditions for bringing the deficit under 3%, the ministry said. (MTI-ECONEWS)