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Ministry says central bank rate rise unjustified

The National Economy Ministry on Tuesday said a decision by the National Bank of Hungary's Monetary Council on Monday to raise the central bank base rate by 25bp to 6.00% was unjustified.

“Professionally, nothing justified the National Bank of Hungary's latest rate rise,” the ministry said on its website.

The government projects average annual inflation will fall from 4.9% in 2010 to 3%-3.5% in 2011, “thus the erosion of the value of the currency is on a downward trend”, the ministry said. The MNB decision goes against the government's economic policy as it raises the cost of financing for investments, slowing growth and employment, it added.

At its monthly meeting on Monday, the Monetary Council raised the base rate for the third time in a row -- this kind of “unusual hurry” was termed “especially unwarranted” by the ministry. The tightening cycle started in November was the first since October 2008.

In a statement published after the meeting, the Council said costs shocks in the coming quarters, such as higher prices for unprocessed foods and fuel, could keep inflation over the bank's and government's joint 3pc mid-term target for “price stability”. (MTI-Econews)