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Hungary to keep key rate unchanged - survey

Hungary's national bank (MNB) will keep the two-week deposit rate at 6%, according to all 21 economists surveyed by Bloomberg.

The decision will be announced at 2 p.m. today, with central bank President András Simor commenting at 3 p.m.

The forint fell to a record low against the Swiss franc last week as the US and Europe struggled to resolve their debt crises.

Policy makers are likely to forgo a rate cut even as inflation slows to avoid fueling the currency’s decline, which would increase costs for borrowers and may harm economic growth and financial stability.

“Despite the sluggish economic recovery, the global market environment does not allow any room for easing,” Gaelle Blanchard, a London-based economist at Societe Generale SA, said in an e-mail to Bloomberg.

The forint weakened 5.6% against the Swiss franc in July, dropping as low as 238.5 per franc on July 18. The Swiss franc rose as the euro and dollar weakened.  Nearly two-thirds of Hungarian household mortgages were denominated in foreign currencies as of May 31, according to the central bank. 

A strong franc could also cut economic growth by as much as 0.5 percentage points, Prime Minister Viktor Orbán’s chief of staff, Mihály Varga, said July 21.