* Czech cbank seen holding fire, looking at CPI, recovery
* Poland also seen on hold, Hungary to continue easing
By Sandor Peto
BUDAPEST, Dec 14 (Reuters) - The Czech and Polish central
banks are seen keeping interest rates on hold at their last 2009
meetings, eyeing inflation pressures, but Hungary is predicted
to cut rates further to help its recession-hit economy.
Hungary, a laggard in recovery in the region, is expected to
ease monetary constraints further to exploit a rise in still
fragile global risk appetite, and bring its high rates lower
before 2010 elections that are likely to create fiscal
uncertainty. []
A benign inflation outlook also allows further rate cuts.
"Hungary is the odd man out," said Handelsbanken's Gunnar
Tersman. "They have made a lot of progress on these underlying
issues (of high deficits and inflation) ... As a result, the
central bank can afford to cut -- for domestic reasons, mainly,
not so much in relation to the global environment," he added.
This year has been marked by rate cuts across the region as
the global crisis sent most economies into deep recession.
A year ago Central Europe, reliant on exports and external
financing, was regarded as one of the most vulnerable emerging
regions. It is seen recovering now at a slower pace than Asia,
but its central banks already gauge rising inflation risks.
The key regional event of the week will be the meeting of
the Czech bank on Wednesday. It is expected to keep rates on
hold, but some analysts expect a 25 basis point cut after easing
totalling one percentage point this year to 1.25 percent.
[]
The Polish bank was the first in the region to end cuts
which brought its key rate in 2009 to a historic low of 3.5
percent. Poland has been the only European Union member escaping
economic contraction, shielded by a strong domestic market.
Hungary's main rate is still much higher at 6.5 percent
<NBHI> despite this year's combined cuts of 3.5 percentage
points as high external debts keep the country more vulnerable.
In a broad-based recovery of emerging market assets, the
Czech crown <EURCZK=> and the Hungarian forint<EURHUF=> have
firmed 15-16 percent from early-year lows versus the euro, while
the Polish zloty <EURPLN=> has gained 19 percent.
Czech rate setters have said the strong crown hurt recovery.
In a Reuters poll, 16 out of 19 analysts still said the
Czech central bank (CNB) would again keep rates on hold
[] after a tight vote last month in which four rate
setters wanted to keep rates on hold and three voted for a cut.
Eyes will be on board member Eva Zamrazilova, who has been
in the stable rate camp but has said that she might support a
small cut if there was no inflation pressure on the horizon.
"But ultimately we think neither the November inflation nor
the final third quarter gross domestic product (GDP) release
provide her reason to change her mind," Morgan Stanley said in a
weekly regional note.[]
POLAND ON HOLD, HUNGARY TO CUT
The Polish central bank (NBP) will meet on Dec. 22 and 23,
and is expected to keep rates on hold. []
Analysts cite state spending high among next year's risks
in the region including Poland. The zloty <EURPLN=> is seen
leading further currency gains [], but the NBP's
next likely move is a rate hike, analysts said.
They have also raised their forecasts for Poland's economic
growth next year to 2.4 percent from 2.0 percent.
"Inflation is a potential problem when things pick up
further. For that reason, the NBP is much more likely to tighten
(earlier) than the CNB," Handelsbanken's Tersman said.
Romania's bank is expected to keep its main rate on hold at
8 percent, the highest in the EU, in January as it struggles to
resolve a political crisis and reopen IMF aid. []
Hungary, unlike regional peers, is seen staying in recession
next year. After years of overspending it has slashed spending
in contrast with anti-cyclical policy in other EU states.
NBH Governor Andras Simor has said rate cuts could continue
as long as the global risk appetite remains strong, while rate
setter Peter Bihari has warned that market expectations for rate
cuts had gone too far. []
"The question now is whether the (monetary) council shifts
to steps of 25 bp in cuts (at its Dec. 21 meeting) or sticks to
the usual 50bp," Erste Bank analyst Orsolya Nyeste said.
(Reporting by Sandor Peto; Editing by Ruth Pitchford)
