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Hungarian Central Bank Retains Policy Rate For Third Time

3/27/2012 8:21 AM ET

Hungary's central bank on Tuesday decided to keep its benchmark interest rate unchanged at 7 percent for the third consecutive session. The decision was in line with economists' expectations.

The last time the Magyar Nemzeti Bank increased interest rate was in December last year, when it raised it by 50 basis points, following a similar hike in the previous month. Since then the bank has kept the rate on hold as the country 's financial assets fell after rating agencies downgraded its debt ratings to junk.

Hungary's annual inflation accelerated further in February to 5.9 percent from 5.5 percent in January on higher food and energy prices, combined with effects of the recent hike in VAT and excise-duty. Inflation remained well above the central bank's 3-percent target.

Hungary's annual economic growth rate remained steady at 1.4 percent in the fourth quarter, helped by strong agricultural production and industrial exports.

Early this month, the European Union decided to suspend a EUR495 million infrastructure aid to Hungary, after the country failed to keep its budget deficit under the limit allowed for EU member-nations. Nevertheless, the ministers agreed to reconsider their decision in June, giving Hungary time until June 22 to address its excessive budget shortfall in a sustainable and credible manner.

by RTT Staff Writer

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