UPDATE 1-Hungarian CPI slows in Nov, lowest since Aug 2006

(Updates with detail, statistics office, analyst comment)

BUDAPEST, Dec 11 (Reuters) - Hungarian inflation slowed more than expected in November to its lowest level since August 2006 and falling fuel prices indicate the drop will continue in December, the Central Statistical Office, KSH, said on Thursday.

Annual consumer price inflation slowed to 4.2 percent in November from 5.1 percent in October and came well below analysts' median forecast for a 4.8 percent rise in a Reuters poll .

"Fuel prices fell by 8.6 percent on the month and that alone lowered annual headline inflation by 0.5 percentage point," KSH statistician Borbala Minary said.

"Fuel prices keep coming down in December so it's for sure that fuel prices will continue to produce this sort of drop," Minary added.

Hungary's central bank Governor Andras Simor predicted on Wednesday that inflation would fall below the bank's medium term target of 3 percent in the second half of 2009.

The November inflation rate is the lowest reading since August 2006 when inflation was 3.5 percent.

Prices in November fell by 0.2 percent from the previous month after 0.2 percent month-on-month rise in October.

Minary added that besides the fall in fuel prices, moderating food price inflation will also help December figures.

"For December, it's important to consider the base effect," Minary said. "Food prices were still quite high and so were fuel prices. We know for sure that high fuel prices will get knocked out and food price will also perform much better."

Core inflation slowed in November to 4.1 percent from 4.6 percent while in month-on-month terms, core prices rose by 0.1 percent, after 0.2 percent rise in October.

Analysts said a slowing economy would also help curb inflation in Hungary which will create room for more interest rate cuts, after the central bank lowered the base rate twice by a total of 100 basis points to 10.5 percent in the past couple of weeks.

"It is not only lower energy prices that is pushing down inflation, but there is no doubt that the sharp slowdown in (economic) growth is also added to the downward trend in Hungarian inflation - as is the case in other countries in the region," said Lars Christensen, analyst at Danske Bank.

"This confirms the expectation for yet another other 50bp rate cut at the upcoming Monetary Council meeting (on Dec. 22)," he added. (Reporting by Balazs Koranyi; Editing by Toby Chopra)