Hungary's central bank kept interest rates the same on Tuesday, resisting pressure from the government to slash borrowing costs during a steep economic slowdown.

Before the meeting got underway, Prime Minister Viktor Orban's top economic aide urged the National Bank of Hungary (NBH) to begin reducing rates as the current levels were "extremely onerous" for the country's economy.

The decision to hold the benchmark rate at 13% matched a forecast by analysts within a Reuters poll carried out last week.

The central bank also left its overnight deposit rate the same at 12.5% and the quick deposit rate at 18%.

"We still need the 18% one-day deposit rate to break down inflation," central bank deputy governor Barnabas Virag commented.

"The NBH will further tighten the impact of the required reserves on liquidity. Looking forward, liquidity management remains a priority so that we can keep monetary conditions in a sufficiently tight range," he added.

Furthermore, the central bank said inflation had likely reached a peak in January but cautioned disinflation might be sluggish. Reuters reports that elevated core market interest rates also represented further potential risks, the deputy governor said.

Markets forecast rate cuts to get underway in Q2 or Q3 when inflation begins to ease.

"Our current view is that policymakers will only feel comfortable to begin cutting the base rate from September this year, at which point inflation is likely to be around half its current level," according to Capital Economics emerging Europe economist Nicholas Farr.

Furthermore, the government predicted a growth slowdown to 1.5% in 2023 from 4.6% in 2022.

"I can only hope that the NBH starts lowering interest rates as soon as possible and will not remain overly cautious," said Economic Development Minister Marton Nagy.

"The 18% nominal interest rate and the current 5-7% real interest rates are extremely onerous for the economy. Unfortunately, for now, there is no sign of easing. Moreover, monetary conditions are being tightened," he added.

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