Hungary's base interest rate held at 6%.

By bne IntelliNews June 21, 2011
Taking into consideration the latest economic and financial developments, the Hungarian central bank's monetary council decided to keep the interest rate unchanged at 6%, the bank said in a statement on its website. The move is in line with market expectations, as Hungary's CPI decelerated to 3.9% in May, from 4.7% a month earlier. There were also no changes in the bank's expectations for the price dynamics. Despite being above the target in the short-run, inflation is seen to get close to the desired 3% level by end-2012, even without further monetary tightening. Hungary's GDP will grow gradually, while still remaining below the potential in the forecast period. The positive dynamics will be pushed by external demand, while household consumption will remain subdued and will have limited contribution to economic growth. Regarding private sector investment, substantial rebound is seen only in mid-2012. The central bank commented that the debt problems in the euro periphery have had restricted effect on the risk premia in the CEE countries, but they are still perceived as a possible downside risk and if the debt crisis escalates, it may cause an increase in the base interest rates in Hungary. The next rate-setting meeting of the Monetary Council will be on July 26.

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