September 14, 2017 / 10:50 AM / 9 months ago

POLL-Hungary to hold base rate, ease policy via other tools

* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/cb-polls?s=GCR01+46+D&st=Menu+G+C Reuters Hungary central bank rate forecasts

* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=HUCPIAP Reuters Hungary average inflation forecasts

* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=HUGDPAP Reuters Hungary GDP forecasts

By Krisztina Than

BUDAPEST, Sept 14 (Reuters) - Hungary’s central bank is expected to keep its main interest rate unchanged at 0.9 percent when it meets on Sept. 19, but with inflation subdued it might use different tools to ease monetary policy further, a Reuters poll of analysts showed on Thursday.

Last month, the National Bank of Hungary said downward risks to inflation prevailed and surging housing prices and wages were no reason for concern, a clear indication that it was considering easing policy again.

Last week, a deputy governor of the bank said the Monetary Council could consider tweaking any of its unconventional monetary policy tools to ensure meeting its inflation target.

The NBH is the most dovish central bank in Central Europe, and in a bid to reduce market lending rates, it has been continually reducing the stock of its three-month deposits and had pumped liquidity into markets with forex swaps.

In the Sept. 11-13 survey, all of the 17 analysts who gave a projection for the meeting said the bank would keep its base rate unchanged at a record-low 0.9 percent.

But several analysts said it could ease policy further by boosting market liquidity or by cutting its overnight deposit rate further into negative territory from the current -0.05 percent.

“We wouldn’t be surprised if something totally unexpected were pulled out of the NBH policy tool box,” Nomura analyst Peter Attard Montalto said in a note.

Montalto said the bank could try to buy time before the European Central Bank starts tightening policy, aiming to flatten the yield curve and loosen wider monetary conditions.

In the Reuters poll, analysts forecast that the Hungarian economy would grow robustly, by 3.8 percent this year and 3.5 percent in 2018.

The economic pick-up could increase average inflation to 3 percent by 2019 from 2.4 percent this year, according to the median forecasts. That would the mid-point of the bank’s inflation target range, which is 3 percent with a one percentage point tolerance range on either side.

That could allow the NBH to stay on the sidelines for years amid a global trend of interest rate increases.

The consensus forecasts in the Hungarian poll showed an unchanged base rate for the end of this year and next and a marginal rise to 0.95 percent by the end of 2019.

For the end of September, the NBH has set a limit of 300 billion forints ($1.16 billion) for the three-month deposits that it accepts from commercial banks.

It is expected to halve that stock to 150 billion forints by the end of the year, according to the consensus forecast of nine analysts who gave an estimate for that figure. The bank will announce the new cap next Tuesday.

$1 = 258.95 forints Additional reporting by Gergely Szakacs, editing by Larry King

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