CEE-MONEY-Fed, ECB actions boost prospect of Central Europe rate cuts

"The Fed's decision to pursue a third round of quantitative easing through open-ended bond purchases, announced last week, however could pave the way for looser policy in Central Europe if excess global liquidity boosts appetite for riskier assets such as relatively high-yielding emerging European currencies and bonds.

Hungary is expected to loosen policy again in the next few months although analysts see only an outside chance of a rate cut when the bank meets on Sept. 25, a Reuters poll shows.

The bank's quarter point rate cut last month, to 6.75 percent, caught investors off guard because the central bank had been expected to hold fire until Prime Minister Viktor Orban's government moved closer to securing an aid backstop from the International Monetary Fund. Talks are set to resume soon. (...)

Economy Minister Gyorgy Matolcsy, however, reiterated last week the need for 'lower interest rates and ample credit'.

Analysts say the four newest board members are sympathetic to that view. With the Fed and ECB moves now giving support to riskier assets like Hungary's 'junk'-rated bonds and the forint, they may elect to ease again in coming months."