CEE MARKETS-Forint gains as central bank sends hawkish inflation signal
By Anita Komuves
BUDAPEST, Sept 22 (Reuters) - The Hungarian forint edged up on Tuesday afternoon after the central bank left interest rates unchanged at 0.6%, as expected, and said in a statement that it was committed to maintaining price stability during the coronavirus pandemic.
The forint EURHUF= was up more than half percent after the bank's statement was published but soon retreated to levels near the five-month lows it reached on Monday.
The currency was up 0.14% and trading at 362.20 per euro by 1403 GMT.
The bank is in a bind, stuck an with an economy that is seen shrinking far more than expected and relatively high inflation, which has also put the forint under pressure.
Markets were watching whether the bank would emphasize inflation or economic stimulus in its message, where hawkish words underlining inflation would strengthen the forint, analysts said before the rate decision.
The bank is ready to use its tools if justified by the inflation outlook, the bank's deputy governor, Barnabas Virag, said at an online news briefing on Tuesday.
Virag said the crisis caused by the coronavirus pandemic could weaken inflation in the medium term, and inflation could stabilise at 3% in 2022.
The NBH cut its 2020 GDP growth forecast to 5.1% to 6.8% recession from 0.3% to 2.0% growth and said that Hungary's economic performance may recover to its pre-crisis level by the turn of 2022.
The Czech crown EURCZK=, recently under pressure from a spike in coronavirus cases, gained 0.7% and was trading at 26.975 after losing more than 1% of its value on Monday.
The overall number of confirmed COVID-19 cases rose to 50,764 in the country of 10.7 million on Monday.
The Polish zloty EURPLN=also rose, gaining 0.26% and trading at 4.4861 versus the common currency.
The Romanian leu EURRON=edged down 0.07% after parliament voted to raise all state pensions by 40%, opening the way for potential ratings cuts two months before a parliamentary election.
Stock markets advanced and recouped some of Monday's losses, with Prague's equities .PX up 0.58%. Warsaw's blue chip index .WIG20 gained 0.96% while Budapest .BUX 0.58%. Bucharest's stocks .BETI were up 1.32%.
AT 1603 CET
Note: daily change
Note: FRA quotes
are for ask prices
(Additional reporting by Luiza Ilie in Bucharest, Jason Hovet in Prague and Alan Charlish in Warsaw, editing by Ed Osmond)
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