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Monetary Council votes 6:1 to keep rates on hold

The National Bank of Hungary's Monetary Council voted 6:1 to keep the central bank's key rate on hold at 7.00% at a meeting on February 28, the condensed minutes of the meeting published on Wednesday show.

MNB governor András Simor and deputy governors Ferenc Karvalits and Júlia Király voted to keep the base rate on hold, as did external members Andrea Bártfai-Mager, Ferenc Gerhardt and György Kocziszky. János Cinkotai was the only member to vote for a proposal to lower the rate by 25bp to 6.75%.

Council members agreed at the meeting that the market had "clearly accepted and confirmed" a decision a month earlier to leave rates on hold, according to the minutes. There was also consensus that the Council "should exercise particular care in monetary policy decision-making".

Members said that real economic risk remained moderate and uncertainty about future changes in risk perceptions were dominant.

Several members said it might prove necessary to raise interest rates if the outlook for inflation and perceptions about the economy deteriorated.

Members agreed that the data published since the previous rate decision in January had not altered the picture of the economy, although preliminary GDP data and January CPI was "somewhat surprising". Several members said the Council should wait with a strategic evaluation of economic development until the MNB's quarterly Inflation Report was finalized in March.

The members agreed that it was "crucially important" for the government to reach an agreement on precautionary financial assistance from the International Monetary Fund and the European Union "as soon as possible".