BUDAPEST: Hungary's central bank is expected to lower its base rate at its meeting on May 24 in a cut which may be the last one in its current easing cycle, a Reuters poll of analysts showed on Wednesday.
The bank has cut its base rate, which now stands at 1.05 percent, in 15 basis point monthly steps since it started a new easing cycle in March as inflation remains near zero, well below the bank's target around 3 percent.
In the May 17-18 poll, 19 out of 20 analysts projected a 15 basis point reduction again for the bank's upcoming meeting and one analyst forecast a 10 basis point cut.
Since the last rate-setting meeting, the bank has signalled that the easing cycle is near its end and that expectations for further reductions were exaggerated.
Only half of the analysts in the poll projected one more cut after a likely reduction this month.
Their median forecast for the base rate for the end of the year rose to 0.83 percent from 0.75 percent in a poll a month ago.
Out of the 11 analysts who gave a forecast for the end of next year, 10 projected no change from 2016 and one analyst forecast a rise in rates.
Analysts said the quarterly inflation report due in June will be a key input for the bank, which is likely to support the case of rate cuts, just like a weak 0.9 percent annual rise in economic output reported last week.
On the other side, Hungarian assets may face a sell-off if British voters decide in a referendum next month to leave the European Union, or the Federal Reserve signals further interest rate hikes.
The Hungarian central bank would welcome some weakening of the forint, but would not like a broad sell-off in local markets, analysts said.
Hungarian assets can get a boost if Fitch lifts the country's credit rating from 'junk' in a review on Friday, but expectations for that have been scaled back as the government targeted looser fiscal policy in the draft 2017 budget.
"There are too many uncertainties at the moment (for a rating upgrade)," said ING analyst Peter Virovacz.
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