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Analysts see Central Bank cutting rates

Analysts polled by Reuters see the Hungarian Central Bank (MNB) cutting rates 50 basis points (bps) to 10.00% at a meeting on Monday.

Fourteen of 20 analysts in the poll, conducted between December 15 and 17, said the NBH's Monetary Council would reduce the base rate 50 bps, while four projected a 100 bps cut. One analyst said rates would fall 25 bps and one saw them staying on hold.

The MNB has cut rates twice by a combined 100 bps in the past month at a regular and an unscheduled meeting. The cuts followed an emergency 300 bps rate rise at the end of October intended to make a speculative attack on the forint more costly.

The analysts see the MNB base rate falling to 7.00% by end-2009.

The analysts aid Hungary's economy would contract 2% in 2009, even more than the 1.1% contraction projected in the previous poll one month earlier. They see the economy expanding a slight 1.2% in 2010.

The analysts see inflation slowing from 4.2% in November to 3.9% in December and 3.6% in January. They put average annual inflation for 2008 at 2.6%, well under the 3.5% projection a month earlier.

The analysts put the forint/euro rate at 261 at the end of January (firming from around 267 on Wednesday), though projections were in a wide range between 250 and 273. They projected an end-2009 rate of 260 forints to the euro, though here, too, projections varied widely between 250 and 305.

The analysts forecast a general government deficit of 3.2% of GDP in 2008 and 2.6% in 2009. They see the current-account deficit narrowing from €6.85 billion in 2008 to €4.2 billion in 2009. Projections for 2009, however, varied greatly, between €2.7 billion and €5.5 billion. The analysts project Hungary will have an even trade balance in 2008, and a €60 million surplus in 2009. One analyst put the surplus as high as €1.7 billion.

The consensus of analysts was that Hungary would join the ERM-2 - the waiting room for joining the eurozone - in 2010 and adopt the euro in 2013. (MTI – Econews)