Hungary's central bank on Monday decided to keep its benchmark base rate unchanged at 6% as expected, pausing after three consecutive months of quarter-point increases.
The central bank started its monetary tightening cycle in November as the inflation crossed the bank's 3% medium-term target due to cost-push shocks hitting the economy.
However, in January, inflation eased more than expected to 4% from 4.7% in December, easing pressure on the monetary council to hike the rates further amid slowing economic growth.
According to latest figures released by the statistical office, Hungary's seasonally and calendar adjusted gross domestic product rose 0.2% sequentially in the fourth quarter, decelerating from a 0.6% expansion in the third quarter.
In a report released earlier this month, the International Monetary Fund noted that the central bank's monetary tightening amid elevated risk premia and incipient price pressures helped anchor inflation expectations and protect the financial sector.
The IMF directors pointed to substantial slack in the economy, as evidenced in particular by high unemployment and suggested a sound medium-term fiscal framework, that would create room for monetary easing.
The IMF expects the economy to expand 2.8% this year after a 1.2% growth last year. At the same time, the average annual inflation is projected to eased to 4.1% in 2011 from 4.9% last year.
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