Hungary hopes that credit rating agencies Fitch and S&P will wait for the results of its talks with the International Monetary Fund (IMF) and the European Union (EU) before taking any rating action, a top government official said on Sunday.

The country, whose economy is seen among the most vulnerable

in central Europe, returned to the IMF for help after more than a year without a financing backstop, only to see its debt downgraded to junk by Moody's this week, triggering a market selloff.

The right-of-centre government, which called the downgrade part of a speculative attack against the country, performed a dramatic about-face and agreed on Friday to mend ties with the EU, the IMF and the country's banks to stabilise the economy.

Hungary expects to conclude the talks on a precautionary arrangement by late January or early February, to draw what it called a safety net around its currency and bond markets amid the turmoil in the euro zone.

We are not playing the Turkish game, Economy Ministry State Secretary Zoltan Csefalvay told Reuters in an interview, referring to the stop-go game which helped Turkey retain market confidence some years ago.

Hungary is also on the brink of non-investment grade credit status at both Fitch and Standard & Poor's, both of which attach a negative outlook to their ratings.

I hope that the two agencies will wait for the negotiation (with the IMF) and what the outcome will be and how this safety net will help Hungary in this turbulent time, Csefalvay said.

He said the spike in government bond yields, which rose above 9 percent across the curve on Friday, was temporary and said he was confident the yields would recede.

I think it is an immediate reaction and certainly we should wait how the market will react on it, he said. As we have seen in other countries, it will stabilise at a lower level.

He said it was up to the National Bank of Hungary as to whether it hikes interest rates at its next policy meeting on Tuesday, even if a hike would further hinder growth.

The central bank is independent in Hungary, he said. If it (hikes rates), it is the independent decision of the National Bank of Hungary. We accept it.

RATE HIKE

The government has criticised the central bank's rate increases between November 2010 and January 2011, which brought rates to their current 6 percent level.

The rate has been unchanged since January, but in the wake of the downgrade analysts expect the bank to hike the rate by 25 to 200 basis points on Tuesday.

Prime Minister Viktor Orban ended aid negotiations with the IMF last year in what he said was an economic freedom fight.

Although it has been forced back to the international lender the government has insisted it will aim for as much flexibility on economic policy as possible during the talks.

However, Csefalvay said Budapest would not shy away from discussing controversial policies, including windfall taxes on banks, as well as other policies that hurt the financial sector, such as mandatory below-market exchange rates to repay foreign currency mortgages.

We can discuss certainly ... these crisis taxes, the bank levy or the FX mortgage repayment scheme, whether this is right or not, Csefalvay said. But all of Europe faces new problems and to solve these we need risk and burden sharing.

He noted that the crisis taxes, the bank levy and other such measures were temporary and the government was in the middle of executing reforms that he said would allow phasing out the taxes from 2013.

The market sees some uncertainty as to what will happen when these (crisis) measures are abolished. We have more than one year to that time. We are in the middle of many important reforms, and we should push (them) through, he said.

Csefalvay said the government would continue to pursue a growth-centred agenda even as it planned next year's budget with a growth estimate in the 0.5 to 1 percent range, below a prior target of 1.5 percent.

However, if the cabinet sees any fiscal slippage next year, it will not hesitate to take steps to raise more revenue, much like September's excise tax hike, he said.

(Reporting by Marton Dunai; Editing by David Holmes)