* Cbank pauses for 2nd month after 10 months of cuts
* Govt programme has implementation risks -cbank
* Govt plan to cut cbank salaries hurts independence-Simor
* Simor vows to defend c.bank independence
(Adds Simor comments, detail, analyst)
By Gergely Szakacs and Marton Dunai
BUDAPEST, June 21 (Reuters) - Hungary's central bank kept
interest rates
Governor Andras Simor warned that a government economic plan announced earlier this month had "very significant" implementation risks and a planned bank tax would sharply cut the financial sector's profitability.
Simor, who has been under attack from the new centre-right government since April elections, also said a plan to cut central bankers' salaries would hurt the bank's independence and that the cabinet had no right to change salaries.
"My oath obliges me to lead the central bank and defend its independence. A cornerstone of this independence is that the central bank picks its staff and decides about their compensation," Simor said in a statement.
"The financial independence of the central bank is a main pillar of central bank independence."
Monday's rate-setting meeting was the first since a plunge by the forint
Markets have only partially recovered from those falls.
Simor said keeping rates on hold had an overwhelming majority on the Council, which also dropped a usual reference to the possibility of rate cuts from its rate decision statement.
"Dropping the reference to future rate cuts can mean that interest rates can stay on hold for longer time now, that is for months," said Gergely Szabo Forian of Pioneer Fund Management.
"My reading is that rate cuts have been taken down from the agenda for now. This does not mean that the easing cycle has ended."
Before Monday's meeting analysts expected the base rate to
be lowered by another quarter-point this year.
DEFENDING INDEPENDENCE
The bank's decision was in line with the expectations of all
25 analysts in a Reuters poll last week
"The Council does not want to give any kind of signal as to the rate trajectory for the next months," Simor said.
The decision to hold rates had no significant impact on the forint
Elsewhere in the region, the Czech Republic and Poland are both thought to be done cutting rates, while Romania may continue to do so.
The NBH said in current global market conditions it was particularly important to maintain disciplined fiscal policy that was sustainable in the long term and said details of the government's plan to meet the 2010 budget deficit target needed to be worked out swiftly.
Hungary's government last week pledged to meet the deficit target and announced spending cuts and a big bank tax to raise revenues, after the concerns over its debt position had given Hungarian markets a renewed hammering.
As part of this package, the cabinet said it would limit public sector salaries and cut central bankers' pay, seen by analysts as the latest attack on the central bank.
The government has stepped up pressure on Simor to resign in the past two months, criticising him over his private investments, and what officials said were serious policy errors.
Simor has said he would fill his mandate, which runs to 2013.
"Leaders of the central bank cannot be bribed with higher pay equally as they cannot be punished with lower pay. This personal independence is the other pillar of central bank independence," he said on Monday.
(Writing by Krisztina Than; Editing by Patrick Graham)