Hungary cenbank ready to use all tools to reach inflation target -newspaper

BUDAPEST (Reuters) -Hungary's central bank sees no alternative to its inflation target and is ready to use all tools at its disposal to restore price stability, Deputy Governor Barnabas Virag was quoted as saying on Wednesday.

The National Bank of Hungary left its base rate unchanged at 13% last month after an emergency rate increase in mid-October to shore up the plunging forint, and pledged to offer its quick deposit tool at an 18% rate "as long as necessary."

"The central bank will use all tools to reach price stability and preserve (financial) stability at all costs," Virag was quoted as saying in an interview by business daily Vilaggazdasag.

The bank has an inflation target of 3% with a tolerance band of a percentage point on either side of that.

At 0744 GMT, the forint, central Europe's worst-performing currency with a 9% loss versus the euro this year, traded at 406.5 per euro, slightly weaker on the day but significantly stronger than all-time lows beyond 430 hit last month.

The NBH's decision last month to end its more than year-long rate-tightening cycle despite projecting a further rise in inflation next year triggered a plunge in the forint to all-time-lows against the euro and the dollar in early October.

"It is important for everyone to understand that we will not tolerate developments jeopardising price stability," Virag said, adding that while current inflation was very high, the current level of the base rate was sufficient for the longer term.

"The most important that we can do now is to preserve our stability as well as the ability for future growth."

Even with the base rate unchanged, Virag said there was scope for a further improvement in monetary transmission, highlighting the FX swap market, Treasury bill yields and retail bank deposits.

"Compared with BUBOR yields, we think that based on the interest rate steps that the NBH has taken so far, further rises of as much as several hundred basis points would be justified in certain yields relevant to monetary transmission," Virag said.

(Reporting by Gergely Szakacs; Editing by Hugh Lawson)