Hungary's central bank holds base rate at 9.5 per cent

HungaryBudapest  - The Hungarian National Bank opted to maintain its high base rate of 9.5 per cent at a meeting of its Monetary Policy Council on Monday.

The bank said in a statement that the decision was a response to worsening economic conditions and a need to maintain stability and the value of the national currency.

The decision was announced after a morning of wild swings in the value of the forint, when it weakened to 307 against the euro before firming slightly.

This volatility came two days after Prime Minister Ferenc Gyurcsany's surprise announcement that he was ready to step down.

The bank's monetary policy council was forced to hike its base rate from 8.5 to 11.5 per cent last October amid fears that currency speculators could drive the forint into the ground.

At the same time, Hungary was bailed out by the IMF, EU and World Bank to the tune of 25 billion dollars as the country looked set to default on its foreign debts.

Since then the central bank has made four cautious 50-basis-point cuts, the last on January 19.

The bank's rate setters deemed further cuts unwise while the forint, along with other regional currencies, was repeatedly hitting record lows. dpa

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