BUDAPEST: The National Bank of Hungary is expected to hold its base rate steady at its Dec. 19 meeting and over the next two years even though rates may rise elsewhere in central Europe, analysts in a Dec. 11-14 Reuters poll said.
Europe's most dovish central bank would continue its unorthodox economic stimulus programmes and remain untroubled by rising inflation, they said.
It may even cut its inflation forecasts and could release details on its new interest rate swap and mortgage note programmes aimed at curbing long-term interest rates and encouraging fixed-rate mortgage lending, analysts said.
Annual inflation rose to 2.5 percent in November but it is still below the bank's 3 percent target, which has a 1 percentage point tolerance range on either side.
According to the median forecasts in the poll, Hungary's average annual inflation would reach 3 percent only by 2019, despite continuing robust economic growth over 3.5 percent.
In the survey, 18 analysts unanimously projected that the bank's 0.9 percent base rate could stay on hold at the Dec. 19 meeting.
The nine forecasts for the bank's overnight deposit rate, the lower threshold of interbank rates, also reflected unanimous expectation that it could remain -0.15 percent at the meeting.
Most analysts do not see a change in the base rate until at least 2020.
Some expect the benchmark 3-month interbank BUBOR rate to start to rise mildly from the middle of next year, but it would not track the pace of projected rate increases by some big central banks in the world, nor regional peers.
"The NBH will react only to the ECB's rate decision (possible rate hike), which is expected in mid-2019 at the earliest," said Peter Virovacz, analyst at ING in Budapest.
"The NBH will react with pushing the 3-month BUBOR (interbank interest rate) higher," he added.
The Czech central bank (CNB) has raised its interest rates twice since August from the region's lowest levels and further hikes are expected for 2018. The main difference from Hungary is that Czech inflation has exceeded the CNB's 2 percent target.
A region-wide rise in inflation has also fuelled market expectations that the Polish central bank could start to lift its own record-low interest rates next year.
But rate setter Grazyna Ancyparowicz told Reuters on Wednesday that the latest pick-up in inflation was caused by factors beyond the influence of the central bank.
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