* Polish, Czech policymakers seen keeping rates on hold
* Analysts equally split on Hungary decision
* Central bankers keep wary eye on euro zone turmoil
By Gareth Jones
WARSAW, Dec 17 (Reuters) - Polish and Czech policymakers are
set to keep interest rates on hold at their final sittings of
the year next week due to subdued inflationary pressures, but
the outlook is less clear-cut in Hungary.
Hungary's central bank, rattled by the centre-right Fidesz
government's unorthodox fiscal policy which it says has stoked
inflation and risk premiums, meets on Monday and analysts are
evenly split over whether it will again raise borrowing costs.
[]
The Monetary Policy Councils of Poland and the Czech
Republic both meet on Wednesday.
Analysts said the three central banks were mainly focused on
domestic issues but some also thought the European Central
Bank's decision this month to keep giving banks unlimited
liquidity well into next year amid a raging euro zone debt
crisis would also play into the policymakers' calculations.
"All three countries are very much affected by euro area
policies and they have to keep a close eye on what the ECB is
doing," said Daniel Hewitt, an economist at Barclays Capital,
adding that ultra-easy monetary policy in the West would
encourage emerging Europe's rates to remain low for longer.
"If we saw some disruption caused by euro area problems,
they (emerging Europe) would be subject to some pressures and
might want to raise rates a bit to protect their currencies."
HUNGARY HARD TO READ
In Hungary, where the central bank surprised markets last
month with a quarter percentage point rate rise, a Reuters poll
showed 24 analysts equally split between those who see a 25
basis point rise next Monday and those who forecast no change.
"It seems to us quite reasonable to expect another rate hike
in December... () the central bank would need to adjust rates
higher by about 100 basis points in the next few months to bring
the inflation forecast closer to the targeted 3.0 percent," said
Diana Gesheva of 4Cast analysts.
Annual inflation stood at 4.2 percent in November but was
driven by rising food and fuel prices while core inflation
remains low at 1.9 percent.
Hungary's Monetary Council has only a small window to act
because the government -- which wants interest rates to decline,
not to rise -- is set to pack the panel with its own candidates
in March. []
In Poland, emerging Europe's largest economy and the only
one in the European Union to avoid recession last year, the
Monetary Policy Council is now expected to keep the key rate at
an all-time low of 3.5 percent until early 2011. []
Minutes for its November sitting showed the MPC voted on
motions to raise borrowing costs by both 25 and 50 basis points
but it rejected both due to low inflationary and wage pressures,
limited credit growth and concerns over a stronger zloty.
"The chance of a rate rise next week has gone down after the
softer CPI figure (for November) and a firming of the zloty,"
said Peter Attard Montalto of Nomura International.
Inflation in November stood at 2.7 percent, a tad below
expectations though above the central bank's 2.5 percent target.
Other data this week showed wage pressures remain subdued.
However, economic growth is now seen accelerating to 4.0 in
the fourth quarter and continuing at that rate in 2011,
increasing pressure on the MPC to act, especially given the
government's reluctance ahead of autumn elections to tighten
fiscal policy.
For the Czech Republic, a majority of analysts see a rate
rise only in the second quarter of 2011 due to an absence of
demand-led price pressures and the central bank's outlook for
low growth of just 1.2 percent in 2011. []
"There is no need to raise rates yet but growth is doing
pretty well... We expect the bank to raise rates in mid-2011, a
bit before the central bank which in its forecasts says late
2011 but we think they are too pessimistic on growth," said
Barclays' Hewitt.
(Reporting by Warsaw, Prague and Budapest bureaux; Editing by
Patrick Graham)
