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Hungary cbank keeps rates on hold at 9.5%

  Hungary’s central bank (MNB) kept key interest rates on hold at 9.50% on Monday in line with most analysts’ expectations, pausing after a series of cuts since November. MNB forecasts GDP contraction to continue in 2010.

In a Reuters poll last week, 16 analysts had said the National Bank of Hungary’s base rate would stay unchanged due to the forint’s weakness, five projected a 50 basis point rate reduction, one forecast a 25 basis point cut and one projected a 100 basis point rise.

The central bank expects Hungarian GDP to fall a further 0.5% in 2010, after a drastic 3.5% decline this year, according to the February inflation report and basic GDP forecast published on the MNB website on Monday.

The bank will publish its detailed fresh Inflation Report on Wednesday. The bank predicts 3.7% annual average inflation for this year and 2.8% for 2010. Both the GDP and inflation forecasts are considerably more pessimistic than those contained in the bank’s most recent Inflation Report.

In its latest Inflation Report published last November, the central bank put this year’s GDP decline at between 1.7% and 2.0% and expected an increase in the range between 0.5% and 2.0% in 2010. The MNB inflation forecast was 3.1% to 3.4% for 2009 and 1.5% to 1.2% in 2010. (Reuters, MTI-Eco)