By Sandor Peto
BUDAPEST (Reuters) - Hungary's central bank may raise interest rates on March 26 for the first time since it started lowering rates nearly seven years ago, according to analysts in a monthly Reuters poll.
In the March 14-21 survey, analysts unanimously projected that the bank would leave its base rate unchanged at 0.9 percent at its upcoming meeting.
But eight out of 13 analysts said that it would start to raise its -0.15 percent overnight deposit rate, the lower end of the bank's "corridor" around the base rate.
Six analysts projected a 15-basis-point rise to zero. Two expected a 10-basis-point increase.
An increase would leave the National Bank of Poland alone among Central Europe's main central banks in not raising rates yet from record low levels.
The forint has rallied since January on expectations tightening will begin in March, when the central bank discusses its quarterly inflation report. Core inflation measures are above the midpoint of its 2 to 4 percent target range.
The currency gave up some ground by Thursday, retreating from 11-month highs of 312.65 against the euro as dovish comments from the Federal Reserve reduced the odds of monetary tightening in Central Europe as well.
Trading on the strong side of 315, it was still up more than 2 percent from the end of 2018, and its strength may make the central bank less hawkish, market participants said.
The median forecast of six analysts projected that the bank would also start to tighten liquidity in forint markets by cutting the stock of its foreign currency swaps to 1.87 trillion forints by the end of March from 1.99 trillion forints.
Even some analysts who expect a rate increase noted that the pro-growth bank may wait to see more inflation data before tightening policy. Even if it moves this month, normalizing rates might be a slow and gradual process.
"This forecast is based on the European economic slowdown bottoming out, while Hungarian domestic demand continues to grow strongly, further eroding the current account surplus," HSBC analyst Agata Urbanska-Giner said in a March 19 note.
The poll sees the base rate staying on hold all this year, then rising to 1.3 percent by the end of 2020 and to 1.75 percent in 2021.
The benchmark three-month interbank BUBOR rate is expected to rise to 0.33 percent from 0.14 percent by the end of the first half of 2019 and to 0.75 percent 12 months from now, still not reaching the level of the base rate.