By Boldizsar Gyori

BUDAPEST, Aug 28 (Reuters) -The forint held onto gains on Wednesday after Hungary's central bank paused its rate-cutting cycle, while the zloty weakened as the Polish government was set to discuss next year's draft budget with an expected deficit increase.

Hungary's central bank kept interest rates unchanged on Tuesday after 15 consecutive cuts totalling 1,125 basis points, leaving its base rate HUINT.ECI at 6.75%, in line with most analysts' expectations.

The forint EURHUF= traded up a touch on the day at 392.75 to the euro by 0818 GMT on Wednesday, and was comfortably past Tuesday's opening level of 394.90.

"Based on market pricing, it would not have been a dramatic surprise if the MNB (National Bank of Hungary) announced another cut, but the failure to do so may also have caused the forint to strengthen further following the decision," MBH Bank said in a note.

In its statement, the central bank said further easing is possible this year depending on inflation developments and the policy course of major central banks.

In Poland, the government was set to adopt the draft budget for 2025 on Wednesday, with local media reporting a sharp deficit increase, as the government brings some spendings done out-of-budget under predecessors into the fold and lifts defense expenditures further.

"In our opinion, the expected acceleration in economic growth, including maintaining solid private consumption dynamics, provides room for reducing the state budget deficit to GDP ratio, although the nominal value of the deficit will remain at a high level," Bank Millennium wrote in a note.

"Media reports suggest a possible increase in the deficit to almost PLN 300 billion (about 8% of GDP)...

"In our opinion, if these reports are confirmed, it will have a negative impact on the treasury securities market, on the one hand due to the increase in next year's borrowing needs, and on the other hand due to the postponement of the prospect of interest rate cuts."

The Polish zloty EURPLN= was 0.1% lower at an almost two-week low, trading above 4.29 to the common currency.

Elsewhere, the Czech crown EURCK= held flat, trading at 25.02 to the euro, staying just on the weak side of the psychological level of 25 which it breached briefly on Tuesday for the first time since June.

Reporting by Boldizsar Gyori in Budapest, Karol Badohal in Warsaw; Editing by Ros Russell

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