Hungary keeps base interest rate at record low

Hungary's central bank MNB kept its base interest rate at a record low of 2.10 percent on Tuesday, the first time for 25 months it did not cut the benchmark rate.

The move was in line with analyst expectations as well as the MNB's stated strategy of keeping the rate at that level for at least the short-term.

In July the MNB cut the rate by more than expected to 2.10 percent but also announced it was ending a two-year-long monetary easing cycle aimed at stoking economic growth.

The MNB had cut the rate each month by 10 or 20 basis points since August 2012 when the rate was 7.0 percent in what MNB governor Gyorgy Matolcsy called one of the "longest and deepest cuts in modern history".

Last month Matolcsy said the bank intended to hold the base rate at 2.1 percent until the end of 2015, unless its medium-term inflation target of 3.0 percent is at risk.

The MNB has argued that Hungary's record low inflation and what it called a "favourable" global risk environment had supported its easing strategy.

Twelve-month inflation, one of the highest in the EU in 2012, has fallen mainly due to government-mandated energy price cuts and low food prices, and even entered negative territory for three months a row from April this year, although it climbed to 0.1 percent in July.

Some analysts however say the Hungarian rate could rise gradually towards 3.0 percent by the end of next year if inflation continues rising rises or US interest rates begin to climb.

In a research note after the MNB announcement however, London-based analysts Capital Economics said an increase in interest rates is "unlikely for at least another year".