Hungary central bank leaves base rate steady again amid forint wobbles
Bank holds main rate steady for second straight month
Forint pressured by dollar gains, threat of U.S. tariffs
Economists see no more rate cuts in Hungary this year
Forint falls could boost next year's inflation - cen bank
Adds central bank statement, Deputy Governor Virag, analyst comment
By Gergely Szakacs
BUDAPEST, Nov 19 (Reuters) -Hungary's central bank left its base rate steady at the European Union's joint highest level of 6.5% on Tuesday, as expected, after a sharp fall in the forint following the re-election of Donald Trump, whose trade tariff plans could hit central Europe.
The forint EURHUF= has fallen around 3% since the bank's latest rate cut on Sept. 24, hitting 22-month lows after Trump's election, and is down about 6% against the euro this year, making it the region's worst-performing currency.
The bank's decision to hold rates steady for the second straight month was in line with analyst forecasts. At 1433 GMT, the forint traded at 406.65 versus the euro, slightly stronger than levels just before the bank's rate announcement.
The National Bank of Hungary (NBH) has warned that currency falls are feeding into prices more quickly than before, raising upside risks to inflation, which scaled the EU's highest levels of more than 25% in the first quarter of 2023.
The NBH said October data showing inflation coming in at 3.2%, below market expectations, signalled lower short-term price pressures, but noted upside risks for the coming year.
"However, exchange rate depreciation seen in past months, as well as changes to the system of excise duties are likely to have inflationary effects in the next year," the bank said in a policy statement.
Deputy Governor Barnabas Virag said the December inflation report would provide an assessment of the impact on next year's inflation, which the bank projected in a 2.7-3.6% range in September, before the latest wave of forint weakening.
He said the base rate could remain at the current level for a prolonged period if needed.
ING said export-reliant central Europe was "fully exposed" to the ramifications of Trump's planned overhaul of U.S. trade policy despite not having close direct ties with the United States.
Economistspolled by Reuters expect no more rate cuts in Hungary by the end of this year, erasing bets for another 25 bps worth of easing projected in last month's survey.
"We think that headline inflation will rise from 3.2% y/y in October to around 4.0% y/y early next year. Against that backdrop, we think the easing cycle will remain on pause into early 2025," Capital Economics analyst Nicholas Farr said.
Romania's central bank also left its main rate steady in November, as expected.
Forint underperforms central European peers in 2024 https://tmsnrt.rs/3CKT2Ld
Hungary has highest export share and debt stock in central Europe https://tmsnrt.rs/3UUt66j
Reporting by Gergely Szakacs; Editing by Ed Osmond
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