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MNB seen cutting rates by 25 bps again

Hungary's central bank MNB is seen cutting interest rates by 25 basis points next Monday, maintaining its cautious pace of easing as inflation prospects are subdued but the forint currency remains fragile.

In a monthly Reuters poll conducted on February 15-17, 21 out of 25 analysts said the MNB would cut its base rate by a quarter percentage point to a record low of 5.75% and four analysts expected the bank to keep rates on hold.

The bank has cut rates by 3.5 percentage points since July.

Analysts said only much lower forint interest rates would encourage banks to increase lending and foster an economic recovery after a 6.3% GDP contraction in 2009. Elsewhere in Central Europe, Czech and Polish rates are already at record lows, at a respective 1.0% and 3.5%, and are expected to rise later this year.

But too quick easing in Hungary and Romania -- countries bailed out by the International Monetary Fund -- would risk currency falls amid fiscal concerns in some fellow European Union members, analysts said. (Reuters)