BUDAPEST, Oct 31 (Reuters) - Hungary's central bank may be able to reduce interest rates as soon as pressure on domestic markets eases, the prime minister said on Friday.
Hungary's central bank increased interest rates by 300 basis percentage points to 11.5 percent in an emergency move last week to contain a fall in the forint after concerns over Hungary's near-term financing ability sent its markets into a tailspin.

"If financial pressure eases, that may open the door for cutting interest rates, exports may recover and domestic producers' goods can become more competitive," Prime Minister Ferenc Gyurcsany told daily Nepszava in an interview.
Early on Friday, the forint traded at 261 versus the euro, slightly below this week's highs hit after Hungary secured a $25.1 billion IMF-led standby loan, the biggest for an emerging market economy since the onset of the global financial crisis.
Last week the forint hit an all-time low near 286 per euro.
However, with the prospect of an Icelandic-style meltdown averted, the economy now looks headed into a recession next year due to a decline in real wages and a fall exports.
The government expects the economy to contract by one percent in 2009.
Earlier this week, central bank governor Andras Simor said the bank would review the direction of monetary policy in the next one or two months.
Simor has said the central bank may reach its 3 percent inflation target in late-2009 or early-2010.

(Reporting by Gergely Szakacs; Editing by Anshuman Daga) Keywords: HUNGARY RATES/ tf.TFN-Europe_newsdesk@thomsonreuters.com cmr

COPYRIGHT

Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.