* Third 25 bps cut in as many months, main rate falls to
* Concerns over weak economy trump CPI, market risks
* Economists, markets losing faith in IMF credit deal
By Gergely Szakacs and Marton Dunai
BUDAPEST, Oct 30 Hungary's divided central bank
cut interest rates for the third successive month on Tuesday,
shrugging off inflation and market scepticism over whether the
indebted country will secure an international financing
The decision by the seven-strong panel to cut official
borrowing costs by another 25 basis points to 6.25 percent
shows newer dovish members appointed by parliament last
year are firmly focused on pushing the economy with lower rates.
The forint eased slightly to 284.75 immediately
after the decision from 284.51 before the announcement.
Governor Andras Simor and his deputies, picked under a
previous government, were outvoted at the past two meetings by
policy makers appointed last year by parliament, where Prime
Minister Viktor Orban's Fidesz holds a two-thirds majority.
The division of Tuesday's vote will not be known until Nov.
"As in the two previous meetings, the decision will likely
be split with the four external MPC members voting as a block to
cut and the three internal MPC members voting against a cut,"
said analyst Daniel Hewitt at Barclays Capital.
"We retain our view that gradual rate cuts will continue at
least until the rate reaches 5.0 percent. After that, further
rate cuts are possible if the external risk environment is
favourable and the exchange rate is stable," Hewitt said.
Analysts polled by Reuters expect the base rate to fall to 6
percent by the end of the year.
Tuesday's cut was in line with analyst expectations in a
Reuters poll last week even as the survey showed for the first
time chances of Budapest securing an International Monetary Fund
safety net are seen at just 50-50.
That is in stark contrast to the beginning of the year when,
with the volatile forint at record lows, most analysts
said an IMF backstop was inevitable, and would be a precondition
for any rate easing.
Market doubts were fed on Monday when Hungary's minister in
charge of the credit talks said "life would go on" without an
IMF deal even though the government was still aiming for an
agreement it first requested nearly a year ago.
Dovish rate-setters, who now clearly dominate over Governor
Simor and his deputies, are scrambling to aid the economy which
is expected to produce one of the weakest growth rates in
central Europe in 2013 after a recession this year.
This camp has argued that weak demand in the economy would
keep a lid on inflation, which rose to its highest in more than
four years at 6.6 percent last month due to higher food and fuel
prices as well as government tax increases.
Simor's camp has called for cautious policy due to inflation
and market risks in the absence of an IMF and European Union
safety net which could curb borrowing costs and restore
confidence harmed by years of unorthodox fiscal policies.
The forint is still central Europe's top gainer
with a 10 percent rise for the year, bolstered by the prospect
of a credit deal and monetary easing in the United States and
the euro zone which has fuelled appetite for risk.
But it has lost about 2.5 percent to the euro since the
National Bank of Hungary began its monetary easing cycle in
August and analysts have said any escalation of the euro zone
debt crisis or a shift in sentiment could put it under pressure.