September 18, 2018 / 12:05 PM / in a month

UPDATE 1-Hungary's central bank keeps rates on hold, could flag tightening

* Bank keeps base rate at 0.9 percent

* Overnight deposit rate also unchanged at -0.15 pct

* Inflation has picked up but running around bank’s target

* To publish fresh inflation forecasts at 1300 GMT

* Bank to hold news conference at 1330 GMT

By Krisztina Than

BUDAPEST, Sept 18 (Reuters) - Hungary’s central bank left all its interest rates unchanged at record lows on Tuesday, but with inflation picking up and emerging markets under strain, it is expected to signal policy will tighten.

Unlike the Czech central bank, which is already hiking interest rates, the National Bank of Hungary (NBH) has so far stuck with its dovish bias, as has its Polish counterpart.

The bank left its base rate at 0.9 percent and its overnight deposit rate at -0.15 percent, in line with analysts’ forecast in a Reuters poll.

Analysts said Tuesday’s meeting offered a good opportunity for the rate-setters to spell out details of planned tightening, since they will also discuss the quarterly inflation report, which may include an increase in inflation forecasts.

The bank will announce the forecasts at 1300 GMT and will hold a news conference at 1330 GMT.

Some market players said the bank could explain how it would withdraw liquidity from markets using its swap tools, which have supported government bond purchases by banks. They said the central bank could tweak its long-term monetary policy interest rate swap (MIRS) tool first.

The bank might also react to a weakening of the Hungarian forint, others said.

“Given the significant weakening of the forint ... we expect the NBH to adopt a more hawkish tone, emphasising its readiness to act in the event that the fForint weakens further,” Goldman Sachs said in a recent note.

The NBH, run by a close ally of Prime Minister Viktor Orban, has made a series of rate cuts and introduced unconventional policies in the past years, boosting the economy.

However, the forint dropped to record lows past 330 versus the euro in early July. It has regained some ground as global sentiment improved, but the plunge of Turkey’s lira has continued to weigh on the region’s currencies.

On Tuesday, the forint traded at 323.75 to the euro at 1203 GMT, off its July lows but down from 310 at the start of 2018.

Annual inflation rose to 3.4 percent in July and August but remained within the tolerance range around the central bank’s target, 3 percent inflation, plus or minus one percentage point.

Several analysts expect the first NBH base rate hike to come in the second half of 2019. However, their median forecast sees no change in the base rate next year, before an increase to 1.6 percent by the end of 2020.

Analysts projected a rise in the overnight deposit rate before the base rate is increased.

Reporting by Krisztina Than, editing by Larry King

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