Analysts expect no change in Hungary base rate, IMF deal at year-end

MNB

Hungary's central bank will keep its interest rates on hold next week, analysts polled by Reuters between May 22-24 said.

The 21 analysts polled unanimously forecast that the bank will keep its 7p base rate unchanged for the fourth consecutive month at its meeting on Tuesday.

Turmoil in European markets has put the forint under pressure and does not allow the bank to cut rates to help the ailing economy, while the National Bank of Hungary (MNB) is not forced to raise rates either as hopes for an international loan limit the forint's losses even as Greece's debt crisis boosts risk aversion, analysts said.

A loan deal with the International Monetary Fund and the European Union could shield the forint and allow the bank to cut rates late this year to 6.5%, and to 6%next year, according to median forecasts in the poll.

Hungary hopes the EU will decide in June that the country has done enough to cut its budget deficit and that this will lead to talks on a loan deal with the IMF and the European Commission.

Asked whether Hungary will secure a financial backstop, 13 analysts said that it will, one said the government was not committed enough to accept the conditions of a loan and one analyst said that only lasting turmoil in global markets would force the government into a deal.

Most analysts projected that the credit deal would be reached in the last four months of the year.

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