Hungary's central bank left interest rates unchanged on Monday at 7.75 percent, in line with most expectations and raised its forecast for 2008 average annual inflation significantly. The bank cut rates by 25 basis points in June, its first cut in 8 months, but left rates on hold at its July meeting.
In a Reuters poll last week, 12 of 17 analysts said the National Bank of Hungary's (NBH) base rate would stay unchanged on Monday while five analysts projected a 25 basis point cut. In its latest quarterly inflation report also released on Monday, the bank raised its 2008 average inflation forecast to 4.5 percent from 3.6 percent, while it reduced its inflation projection for 2009 to 2.4 percent from 2.8 percent.
"On our forecast horizon we see an upward risk to inflation, while for economic growth we see a downward risk," the bank said in the inflation report. "If economic growth slows faster than we expected, it could have a bigger disinflationary impact and could reduce inflationary risk."