* Ruling Fidesz party to pick four new rate setters
* Parlt due to elect new Monetary Council members on Mon
* New council seen cautious with easing -analysts
By Krisztina Than
BUDAPEST, March 4 (Reuters) - Hungary's government may change the course of central bank policy for the looser with four appointments on Monday after a year of conflict with the bank over policies the cabinet says failed to support growth.
After slashing central bank wages last year, the ruling Fidesz party has first had to find candidates willing to take the reduced wages on offer and has promised a U-turn for later this year that will raise pay.
But it was its move to change the rules on appointments to the board that drew the ire of the European Union, and Fidesz is now expected to force candidates through parliament who will probably take a more accommodative stance.
Given rising risks of inflation, that may not mean turning back the 75 basis points in rate rises delivered by the bank since November, but analysts expect rates will not be raised again this year and could yet be cut.
"We do not expect the new council to start aggressively cutting rates," said Matyas Kovacs, analyst at Raiffeisen.
"We think there will be room for a cut if the government sticks to the deadlines laid out for structural reforms and the outlook on Hungary's credit rating improves - then there can be a rate cut of 25 basis points in the fourth quarter."
The vote in parliament fills four vacancies on the 7-member rate-setting body, giving the new group a majority on the 7-strong body over Governor Andras Simor and his two deputies.
The new council faces an improving economy that will add to risks to inflation from surging fuel and food costs as well as concerns over a still fragile forint whose weakness hurts the many Hungarians with foreign currency loans.
PAY CUT
Last year Fidesz passed legislation to cap salaries at 2 million forints ($10,190) per month in the public sector, effectively cutting Simor's salary by 75 percent, and also cutting pay for his two deputies.
The cut, however, also brought a reduction in rate setters' salaries which are set at 35 percent of the governor's salary, reducing the job's appeal and a website reported this week the government was struggling to find candidates.
A spokeswoman for Fidesz MP Antal Rogan confirmed to Reuters on Wednesday that the government was planning to raise the salaries again.
The changes in the central bank law stripped Simor of the power to appoint two members of the council, giving them to parliament instead and European Central Bank President Jean-Claude Trichet warned on Thursday that could lead to legal action by the EU.
But despite all the friction, Prime Minister Viktor Orban has also said the country must work towards lowering inflation and that a reshuffling of the Council would not lead to radical changes in central bank policy.
He said monetary policy belonged to the world of "slow sports" and calmness was the most important thing, while a predictable form of cooperation was needed between the Monetary Council and the government.
Simor has also said he would remain on the council for his full term, which runs until 2013.
REFORMS CRUCIAL
A Reuters poll of analysts earlier this year showed that the revamped Council with members chosen by Fidesz could be more open to using stimulus measures to support the government's unorthodox pro-growth policy.
Hungary's government embarked on an unconventional policy track last year to boost growth and keep the budget in check.
Earlier this week it launched a package of fiscal measures, which it said would improve the budget balance by 900 billion Hungarian forints by 2013, when crisis taxes imposed on certain business sectors expire.
Analysts welcomed the measures - which include tightening rules on early retirement and disability pensions, and cuts in drug subsidies - but said the government would need to show a strong political will to implement the fiscal cuts in full.
This could lower risk premia on Hungarian assets, and increase room for monetary easing, they said.
(Reporting by Krisztina Than; editing by Patrick Graham)