Amended: Removing economists' expectations from the first paragraph of the story. This is the corrected version.
Monday, the Hungarian central bank kept the key policy rate unchanged for the second month in a row.
The Monetary Council of Magyar Nemzeti Bank left the key policy rate stable at 9.5%, repeating its February move. In January, the central bank had reduced the base rate by 50 basis points.
Over the weekend, the Hungarian Prime Minister Ferenc Gyurcsany had announced his decision to step down. The Hungarian forint took a beating following the development. The currency has weakened significantly over the past few weeks after concerns emerged over the strength of the East European economies.
Economists were divided on their expectations for the latest rate decision considering the uncertainty on the political front. A new premier is expected to be named in three weeks.
Earlier in the month, the European Union leaders rejected Hungary's call for a 180 billion-euro or $228 billion aid package for Central and Eastern Europe, giving a clear message that the bloc was determined to avoid protectionist moves in response to the ongoing economic crisis. The battered Hungarian economy had received nearly $26 billion aid from the International Monetary Fund, the EU and the World Bank last year.
The Hungarian economy is in recession. The gross domestic product declined 1.2% quarter-on-quarter in the final three months of 2008, after shrinking 0.5% in the third quarter. Meanwhile, inflation eased to 3% in February from 3.1% in January.
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