PREVIEW-Hungary's revamped central bank seen holding rates

WHAT: Hungarian central bank interest rate decision

WHEN: March 28, 1200 GMT



REUTERS FORECAST - The bank (NBH) is expected to keep interest rates on hold at its first meeting after the government appointed four new rate-setters to its policy council.

All the 21 analysts polled on March 22-23 projected that the base rate will stay at 6 percent on Monday. That would be the second month of no change following rate increases totalling 75 basis points between November and January.

In the region Poland's central bank is expected to raise its own rates further after a rise in January, and the Czech central bank may also increase interest rates later this year.



FACTORS TO WATCH

The bank kept its rates unchanged last month, saying that more economic figures, its own quarterly inflation report and the details of the government's economic programme should shed more light on inflation trends.

Since the February meeting, the government has announced a plan to cut the budget deficit and debt partly through spending cuts which will be implemented later this year.

Its parliament majority has also elected four new central bankers to the NBH's 7-strong rate-setting council, and three of them will attend Monday's meeting.

Markets will eye the banks news conference for signs of any divide between the existing members of the council and new appointees -- who may be more inclined to support government calls for a boost of liquidity in the economy.

The newcomers have pledged a cautious approach and said they would fight inflation, to sooth concerns that the government -- which had criticised the NBH's rate increases -- could give them a mandate to slash interest rates.

The poll showed that most analysts see the bank keeping rates on hold all this year. Forecasts for 2012 are mixed, but the consensus projects cuts totalling 50 basis points next year.

'There is inflation pressure in the world, interest rate tightening has started in developed countries, which points towards an interest rate rise in Hungary as well,' said Gergely Szabo Forian of Pioneer Fund Management.

'But confidence in Hungary has been strengthening and if that continues, that may even allow cutting rates.'

On Monday the Council will also discuss the quarterly inflation report calculated in a new model.

Hungary's annual headline inflation picked up to 4.1 percent in February from 4.0 percent in January, but was slightly below expectations, while core inflation stayed low at 1.9 percent.

A modest 1.6 percent annual increase in gross wages in January and 0.1 percent increase in retail sales have shown that demand-led inflation pressure remained moderate.

The bank's medium-term inflation target is 3 percent. The consensus forecasts in the poll saw average inflation at 4.0 percent this year, 3.5 percent in 2012 and 3.1 percent in 2013.



MARKET IMPACT - Keeping interest rates on hold would have no impact on Hungarian asset prices, dealers said. A surprise rate cut could slightly weaken the forint and cut government debt yields in maturities up to 2 years, while it could trigger some inflation concerns and raise long-term yields.

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(Reporting by Sandor Peto/Gergely Szakacs; Editing by Ruth Pitchford) Keywords: HUNGARY RATES/PREVIEW ([e-mail]; [phone]; Reuters Messaging [e-mail]) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.