BUDAPEST (Reuters) - Hungary’s central bank will cut interest rates to a new low of 1.5 percent next Tuesday but may then signal a pause in its easing cycle due to jitters over Greece and an expected rise in inflation, a Reuters poll found.
The National Bank of Hungary (NBH) has been trimming its base rate NBHI in 15 basis point steps since March to help government efforts to boost growth.
All 20 analysts surveyed between June 12-17 forecast the bank would cut by 15 basis points again when it meets next week. Some also projected further cuts taking the benchmark interest rate to 1.2-1.3 percent by the end of the year.
A recent overhaul of the bank’s monetary policy toolkit is not expected to affect its very dovish stance.
The median forecast was for a base rate of 1.5 percent at the end of 2015, rising to 2 percent by end-2016 when U.S. rates are also seen higher.
The central bank may also raise its inflation forecast when it publishes its latest inflation report next week.
Some analysts say this could justify more caution and a possible halt in the cycle.
“I think they will raise the forecast to 3 percent for the end of next year and based on this, they could signal a halt,” said Janos Samu at Concorde. “But if they want to weaken the forint, they will not say anything and keep cutting.”
The forint is trading at 312 versus the euro, weaker than 309 at the time of the May meeting.
The NBH says it has no exchange rate target, but some economists believe it does not mind the forint’s weakening.
“The Greek situation and the looming Fed interest rate hike have a limited impact on the forint and the central bank would probably be comfortable with a weaker forint,” said Eszter Gargyan, an economist at Citigroup.
In May the bank left the window open to further easing.
One of its rate-setters, Gyula Pleschinger, told Reuters the bank could continue its easing cycle as long as it helps inflation return to its target and that the inflation report could determine whether cuts can continue.
In March, the central bank estimated average inflation at zero this year and 2.6 percent in 2016, below its 3 percent medium-term target.
Price growth accelerated to 0.5 percent year-on-year in May, the first increase in annual terms since August.
Reporting by the Budapest bureau; Editing by Catherine Evans