CEE MARKETS-Forint pushes higher as Hungary likely to keep interest rates on hold

BUDAPEST, March 24 (Reuters) - The forint edged up in early trading on Tuesday as Hungarian central bankers were expected to keep interest rates on hold later in the day owing to chances of higher inflation amid a global energy price surge.

On Tuesday, oil prices rose again as Iran denied it had talks with the U.S. to end their war in the ‌Gulf, contradicting U.S. President Donald Trump who said a deal could be reached soon.

The surge in energy prices this month during the conflict has turned central banks more cautious. The Czech central bank last week kept rates unchanged, following a February meeting where it had discussed a cut.

Last month, Hungary's central bank delivered its first 25-basis point rate cut since late 2024.

However, only one analyst in a poll expected a rate cut on Tuesday amid a sharp rise in projected inflation by the end of 2026, driven by the energy price shock caused by the Middle East conflict.

Hungary's forint EURHUF= was up 0.1%, trading at 387.60 per euro at 0807 GMT.

"We too believe that the (National Bank of Hungary) is not in such a hurry to deliver the next rate cut in the current market environment. Instead, the (NBH) has re-established its independence in recent months, and the next meeting is just a month away," Commerzbank wrote in a note.

"If the war ends by then and oil prices consequently fall significantly, the (NBH) could still deliver its rate cut," they wrote.

VOLATILITY STILL SEEN

The bank is scheduled to announce its rate decision at 1300 GMT and will publish a statement and hold a press conference at 1400 GMT. The bank will also publish its latest inflation projections.

"For most CEEMEA countries, the current energy price shock is taking place against the backdrop of weak demand and muted underlying inflationary pressures," Goldman Sachs wrote.

"We do not anticipate this shock leading to sustained, broad-based inflationary increases. However, this outlook would change if the shock were to result in significant FX weakness.

Elsewhere, the Czech crown EURCZK= was stable and the Polish zloty EURPLN= eased 0.1% to trade at 4.2635 per euro.

Stock markets in the region were mixed, with Budapest's equities .BUX down 0.3% while Warsaw's blue chip index .WIG20 was little moved.

"Despite Monday's signs of de-escalation, the war continues... and the outcome of the peace talks is highly uncertain, which will contribute to continued elevated volatility in the FX market," Polish bank PKO BP said.

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