CEE MARKETS-FX off highs as inflation slows, investors gauge rate cut path

By Boldizsar Gyori

BUDAPEST, May 11 (Reuters) - Central Europe's currencies eased from recent highs on Thursday, while Czech market rates fell, with markets digesting slowing inflation to gauge chances of how soon rate cuts may come in the region.

Central banks in Poland and Romania kept rates unchanged on Wednesday, in line with expectations and following others in central Europe.

Markets will watch later on Thursday a conference of Polish Governor Adam Glapinski, who previously has said he hoped the first interest rate cut would be possible at the end of the year, but would depend on how much inflation eased.

Data on Thursday showed Czech inflation slowed to its lowest in a year in April to a headline rate of 12.7%, possibly taking pressure off a central bank that came close last week to even renewing rate hikes that have been on hold since last year.

The Czech crown EURCZK= dropped 0.1% to 23.4900 against the euro at 0904 GMT. A two-year interest rate swap fell as much as 25 basis points.

"The CPI print definitely plays to the cards of doves in (the central bank) board," a Prague-based rates trader said.

The Czech National Bank voted 4-3 last week to keep rate stability, although a growing minority supported a further hike to the base rate of 7.00%, which is the highest in over two decades.

Also this week, Hungary's CPI slowed from 25.7% in March to 24.0% in April, below expectations, with core inflation receding to 24.8% from 25.7%.

Analysts said this signalled chances of a rate cut by the central bank in its 18% one-day deposit rate.

"The absence of a surprise supports the likelihood of a first cut at the May rate meeting," Erste Bank analysts wrote in a .

The Hungarian forint EURHUF= on Wednesday managed to break the 370 threshold against the euro all the way down to 369.4, its strongest position since April 2022. The forint pulled back to trade at 370.9 at 0904 GMT on Thursday.

Inflation in central Europe has been stronger than in the euro zone, with Hungary's price growth above 20% since September 2022, leading to the tightest monetary policy in Europe, with a base rate set at 13%.

Poland's central bank left its main interest rate on hold at 6.75% on Wednesday, maintaining its view that slowing growth will help curb inflation as price growth looks to have peaked.

Romania's central bank also kept interest rates unchanged.

The Polish zloty EURPLN= hovered at 4.5265 against the euro, slightly weaker on the day, and Romania's leu EURRON= also backtracked a touch.

(Reporting by Boldizsar Gyori in Budapest, additional reporting by Jason Hovet in Prague and Karol Badohal in Warsaw; Editing by Shilpi Majumdar)

((boldizsar.gyori@thomsonreuters.com))

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