* CPI goal achievable in 2012 with key rate at 6 percent
* Significant two-way risks around baseline CPI scenario
* Weak household demand may allow rate cut in longer run
By Krisztina Than and Sandor Peto
BUDAPEST, April 11 (Reuters) - Hungary's key base rate must stay at its current level for some time for the central bank to achieve its inflation target in 2012, but weak household demand may allow a rate cut in the longer run, Deputy Governor Ferenc Karvalits said.
Karvalits told Reuters on Monday that there were significant two-sided risks around the baseline scenario in the bank's March inflation report, which -- if they materialise -- may necessitate further tightening or even create room for a rate reduction in the longer term.
The bank (NBH) kept its benchmark interest rate steady at 6 percent in the past two months, after three successive rate hikes between November and January.
Karvalits said that if the assumptions of the baseline scenario are met, the bank would achieve its 3 percent inflation target in the second half of 2012.
"This however means that the current interest rate level needs to be maintained for an extended period for us to be able to achieve the inflation target," he said in an interview.
Karvalits said external cost shocks had been much stronger than the bank had expected, but the pass-through of these had been weak. But it could not be excluded that as domestic demand picks up, the pass-through impact might strengthen.
"If this happens, that could necessitate monetary tightening," Karvalits said.
But he said he personally assigned a significant likelihood to another risk scenario of continued sluggish household demand -- helping disinflation and possibly opening the room for rate cuts in the longer horizon.
"The negative credit flow in the household sector can result in a weaker rebound in domestic demand than we assumed in the baseline scenario and this may contribute to a robust disinflationary process, but we will not see this for certain in the next one or two months," he said.
"This is a trend unfolding on a longer horizon. In the near term this will not have an impact on our thinking. However, in the longer term, it may result in monetary easing taking place sooner than otherwise. But not tomorrow."
At its March meeting, there was an indication of a new tone to the Council's statement in its raising of the possibility of a rate cut in the medium term.
Analysts in the last Reuters poll expected the base rate to remain on hold at 6 percent until the end of 2011 and decrease to 5.5 percent by the end of next year.
HARMONY
When asked if he could see divisions in the new-look Monetary Council, in which the four delegates of the ruling Fidesz party were now in a majority, Karvalits said the Council decided on rates in March in "perfect harmony".
He said the members of the rate-setting body shared the baseline scenario, and views within the Council did not diverge to an extent which would have led to a debate of the main message -- rates staying on hold for an extended period.
Markets had been watching for any signs of a division between the existing members of the council and the new appointees -- who may be more inclined to support government calls for action to boost liquidity in the economy.
Karvalits said the Council did not discuss any unconventional tools of policy at its meeting in March. The country's governing majority will rewrite the National Bank's rules by the end of this year in a move analysts say could include sensitive areas but was not likely to threaten the bank's independence.
When asked if the strengthening of the forint since the March rate meeting to around 264-265 from 268, if continued, could create scope for monetary easing, he said:
"The central bank does not want to comment on short-term exchange rate movements. We react to lasting changes in monetary conditions." (Writing by Krisztina Than; editing by Stephen Nisbet)