* Bottom of interest rates could be 2.5-3.0 pct-central bank
* Analyst consensus forecast for bottom was 2.8 pct
* Cbank chief urges legislation to resolve fx loan problem
* Planned fx loan scheme key risk to forint, rates-analysts
By Sandor Peto
BUDAPEST, Dec 21 Hungary's central bank may cut
its 3 percent main interest rate further to 2.5 percent in the
next months but deeper cuts would be risky, the bank's governor
Gyorgy Matolcsy said on Saturday.
Analysts' median forecast for the likely lowest point of
rates was 2.8 percent in a Reuters poll conducted before the
bank's latest 20-basis-point rate cut on Tuesday.
"There is a bottom in Hungary for rate cuts - the Monetary
Council will decide in the next months where it will stop within
the room of manoeuvre it still has, maybe somewhere between 2.5
and 3 percent," Matolcsy told private television channel Hirtv.
Matolcsy, an ally of Prime Minister Viktor Orban who faces
elections in April or May, said interest rates could not go much
lower, such as to the euro zone's near-zero levels, because
government debt was still high.
Cuts to 2.5 percent would bring Hungary's rates on a level
with the main central bank rate in Poland, Central Europe's
biggest and most robust economy, which has much lower debt
levels than junk-rated Hungary.
Investors have been concerned that Hungary's central bank
may cut rates too deep at a time when the U.S. Federal Reserve
cuts back the stimulus that fuelled capital flows into emerging
economies and helped rates fall globally.
Matolcsy was economy minister before he was appointed
central bank chief in March. The Hungarian central bank has cut
rates steadily since August 2012, by a total of 4 percentage
points, to help the government's pro-growth policies.
The economic recovery is still slow and next year the
economy is expected to grow at a rate of around 2 percent.
With months to go before the elections, Orban's ruling party
has a firm lead in opinion polls. But chances are slim that it
will be able to repeat the landslide victory of 2010, when it
won two-thirds parliamentary majority.
A key risk to the forint currency and further rate cuts is a
planned government scheme to help foreign currency borrowers, at
the expense of heavily taxed banks, some of which have posted
big losses in the past years.
Hundreds of thousands of households in Hungary took up Swiss
franc and euro loans before 2008 but the decline in the forint
since then has made these loans very costly.
Matolcsy urged the government to pass legislation to help
borrowers and resolve the problem.
"The stance of the National Bank of Hungary is clear: banks
had abused their dominant position," he said.
Matolcsy said it was unacceptable that banks used their
dominant position to unilaterally modify the contracts,
increasing the costs of borrowers.
"We need a legal solution, a law which settles the situation
both retroactively and in a forward-looking way," he said,
Analysts have said retroactive cuts in interest rates
applied in the foreign currency loan contracts could hurt banks
Matolcsy has said four out of the eight biggest banks could
quit Hungary in the next 6-18 months, adding that these banks
were deleveraging their lending anyway, and local banks or Asian
investors could take their place.
Foreign banks which have units in Hungary include Austria's
Raiffeisen and Erste, Italian lender Intesa
Sanpaolo and Unicredit, Belgium's KBC
, German bank Bayern LB, Citi and the
banking arm of General Electric.