* Key base rate cut by 25 bps to 5.75 percent
* More cuts possible though leeway has narrowed - cbank
* Cbank raises CPI f'casts, but seen below target in 2011
(Adds more detail, analyst, background)
By Krisztina Than and Gergely Szakacs
BUDAPEST, Feb 22 (Reuters) - Hungary's central bank cut its key rate by 25 basis points on Monday to a record low of 5.75 percent but said room for further easing has narrowed given the uncertainties in global markets caused by debt concerns.
The bank (NBH), which has cut its base rate by 375 basis points since July 2009 to help the economy recover from recession, slowed the pace of cuts in December due to increased market jitters about debt servicing in Dubai and Greece.
Some analysts now expect the bank to pause in its rate reductions in coming months, in part also due to uncertainty ahead of Hungarian parliamentary elections in April, which the main opposition party, Fidesz, is tipped to win.
The bank raised its inflation projections for both 2010 and 2011 on Monday but it said inflation was expected to fall below its 3 percent target early next year.
"Regarding macroeconomic (factors), inflation and growth, cutting interest rates remains possible," Governor Andras Simor told a news conference.
"The room has narrowed because international financial and capital markets have become more uncertain. Cutting rates further will be possible if Hungary's risk assessment allows."
Hungary's regional peers, the Czech Republic and Poland, have also cut their key interest rates to record lows, respectively 1.0 and 3.5 percent, and rates in those countries are expected to rise later this year.
But Hungary and its neighbour Romania, which have both been bailed out by the International Monetary Fund (IMF), still look to have room to cut further.
"We expect one more rate cut, which will mean a bottom of 5.5 percent. General elections in April are likely to stop the easing cycle," said Anders Svendsen, an analyst at Nordea.
RISK ASSESSMENT
Simor said concerns over the sustainability of the debt of certain European Union states might affect the risk premium of Hungary, which also has high debt levels.
April's elections could only influence monetary policy decisions if the next government's programme affected risk perceptions about Hungary, he said.
Simor said the rate-setting Monetary Council discussed three options on Monday: a 50 basis point cut, a 25 basis point cut and keeping interest rates on hold. The middle option was chosen "with a convincing majority."
In a Reuters poll last week 21 out of 25 analysts said the bank would cut by a quarter of a percentage point.
Fiscal concerns in the euro zone periphery, mainly Greece, have kept currencies volatile in Central Europe in past weeks, and analysts said this would keep the Monetary Council cautious.
"Any potential signs of worsening market conditions could lead to a halt in the easing cycle (especially ahead of the upcoming elections)," said Gyorgy Barta at CIB Bank.
"Real economic developments and the inflationary outlook still point to a need for lower rates, however."
UNCERTAINTY
In April the centre-right opposition Fidesz party is widely expected to oust the ruling Socialists after eight years. If the party wins, economists believe the new government could increase the public deficit, a Reuters survey earlier this month showed.
The economy shrank 6.3 percent in 2009 and is expected to stagnate this year according to a Reuters poll, and the central bank's latest lending survey showed that firms are still not taking out investment-related loans.
The bank expects the economy to contract 0.2 percent in 2010 and raised its inflation forecasts for this year and next, in part due to higher than anticipated increases in energy and raw materials prices.
Inflation, which was running at 6.4 percent in January, "could drop below the (three percent) target in the first quarter of 2011," Simor added.
(Reporting by Krisztina Than, editing by Patrick Graham, John Stonestreet)