UPDATE 1-Hungary cbank holds rates at 5.25 pct amid market falls
Reuters
Published Jul 19, 2010 08:36AM ET
* Cbank keeps base rate steady again, as expected
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* Decision comes after IMF/EU talks fizzle, markets fall
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(Adds background, analyst)
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BUDAPEST, July 19 (Reuters) - Hungary's central bank kept
interest rates
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The bank's regular rate-setting meeting on Monday followed a suspension of a regular review of Hungary's financing programme by the International Monetary Fund and the EU on Saturday.
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Hungary's markets sold off on Monday after talks with lenders fell through, rattling investor confidence in the government's policies and raising concerns over the country's debt vulnerability.[ID:nLDE66I0BE]
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The central bank's decision was in line with expectations of all 25 analysts in a Reuters poll last week HUREPO1 .
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Some analysts said on Monday that if a weakening of the forint EURHUF=D2 continues and the currency eases past levels of 300 to the euro, the bank might opt to hike rates.
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At 1215 GMT, the forint EURHUF=D3 traded at 289 versus the euro, a touch weaker than 288.35 shortly before the interest rate decision.
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The bank had reduced its key rate between July 2009 and April 2010 by a combined 425 basis points, but left them on hold in May and June citing risks to inflation and market risks.
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Central bank Governor Andras Simor will hold a news conference at 1300 GMT.
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Analysts said the bank's decision to hold rates was appropriate.
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"In this situation, the central bank must calm markets, and that is what they are presumably going to do today," said Matyas Kovacs at Raiffeisen, referring to the pending press conference.
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"We await the press conference but look for (Governor) Simor to drive home the seriousness of what's happened and also talk more about the impact of banking tax and the threats to NBH independence," added Peter Attard Montalto at Nomura.
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(Reporting by Marton Dunai and Krisztina Than)
Written By: Reuters
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