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Monetary Council voted 5:2 to keep key rate on hold at October 25 meeting

The Monetary Council of the National Bank of Hungary voted 5:2 to keep the central bank's key rate on hold at 5.25% at a rate-setting meeting on October 25, the condensed minutes of the meeting show.

At a press conference after the meeting, MNB governor András Simor said rate-setters voted “almost unanimously” to keep rates on hold. The other two proposals were for a 25 bp rate cut and a 25 bp rise, he added.

Simor as well as his deputy governors Ferenc Karvalits and Júlia Király voted to keep the rate on hold, together with external members Csaba Csáki and Judit Neményi. Péter Bihari voted to raise the rate by 25 bp and Tamás Bánfi voted to cut it by 25bp.

The Council has kept rates on hold at the last six of its monthly rate-setting meetings following a campaign of cuts that shaved 425 bp off the base rate, bringing it to a record low.

In a statement published after the meeting, the Council said the decision to keep rates on hold was made in light of uncertainty about the inflationary outlook. Weak domestic demand continues to exert a dampening influence on inflation, but employment growth and a proposed cut in the personal income tax rates could boost consumption from 2011. Companies could also pass the cost of proposed “crisis taxes” on to consumers, the Council said.

The government recently levied windfall taxes on energy suppliers, retail chains and telecommunications companies. The government earlier levied a similar tax on financial sector companies. (MTI – Econews)