* 50 bps cut in line with analysts' expectation
* Key base rate falls to April 2008 level
* More cuts may come if CPI, risk assessment allow -cbank
(Recasts with cbank comments, detail)
By Balazs Koranyi and Sandor Peto
BUDAPEST, Aug 24 (Reuters) - Hungary's central bank (NBH)
cut key rates by 50 basis points to 8.0 percent on Monday as
expected
Monday's rate cut, the second reduction in two months, took Hungary's key base rate to a level where it last stood in April 2008, well before the global crisis hit the country in October when it resorted to IMF and EU for financial help.
The 50 basis point cut followed a one percentage point reduction in July, as the forint has stabilised at relatively firm levels, demand for Hungarian government bonds picked up and yields have come down, signalling a rise in investors' appetite for riskier assets and an improvement in Hungary's situation.
"The capital market developments over the past month ... our stabilising risk assessment allowed for the 50 basis point cut," Governor Andras Simor told a news conference after the decision.
"Monetary policy may be eased further if it does not pose a threat to the inflation outlook and if risk assessment allows it," the rate-setting Monetary Council said in its statement.
In a Reuters poll last week, 19 of 23 analysts forecast a half percentage point cut and four predicted unchanged rates, but some analysts did not rule out a bigger 100 basis point cut.
Simor said there were two options before the Council -- a 50 basis point and a 75 basis point cut -- and the body decided on the 50 basis point cut "with an overwhelming majority".
In July the bank cut rates in a tight vote, and Simor, who wanted a smaller, 50 basis point cut, was voted down.
The central bank on Monday also released fresh economic forecasts [ID:nTST000008] which project the economy will contract by 6.7 percent this year, unchanged from the bank's previous forecast, and will remain in recession next year as well.
"The Hungarian economy remains in deep recession with no real inflationary pressure. Therefore if the risk appetite continues to be present in financial markets ... the NBH will continue monetary easing providing stimulus to the stressed Hungarian economy," Danske Bank said in a note.
MORE EASING AHEAD
Hungary's rate cuts have gathered speed just as most of the region's other central banks are already nearing the end of their easing cycles, and analysts said the Hungarian bank was expected to deliver further cuts in the remainder of this year.
Analysts expect the Hungarian economy to shrink by 6.3
percent this year
"With the deep slump in the economy, we may expect further cuts. This is in contrast with the situation in the other Central European countries where we think the rate-cut cycle is over," said Gunnar Tersman, analyst at Handelsbanken.
The Hungarian bank resumed its monetary easing cycle in July after a six-month pause. In the minutes of July's meeting it said rates "could be reduced substantially from their current level by the end of the year" if there is no significant deterioration in global markets and domestic fundamentals.
Simor said on Monday the bank would have to lead markets but also be predictable in its rate policy.
In last week's Reuters poll analysts lowered their forecast for the year-end base rate as the median projection dropped to 7.5 percent from 8.5 percent one month ago. [ID:nLAG003669] (Writing by Krisztina Than; editing by Stephen Nisbet)