UPDATE 1-CEE MARKETS-Forint weakens after 15bp rate hike, gov't bond yields firm

(Updates with Hungary cenbank rate hike, forint reaction) By Anita Komuves BUDAPEST, Oct 19 (Reuters) - The Hungarian forint weakened on Tuesday after the central bank hiked its base rate by less than expected, disappointing some market participants who had expected a bigger increase amid rising inflation. Hungary's central bank raised its benchmark base rate by 15 basis points to 1.8% and pledged to act "in the most decisive manner" against inflation risks. The rate rise was in line with the analyst consensus in a Reuters poll. Hungary is facing a prolonged fight against inflation and its tightening cycle will amount to a marathon rather than a sprint, central bank Deputy Governor Barnabas Virag said after the rate hike. The forint gave up early gains that had been spurred by expectations of a bigger hike, easing to 362.25 versus the euro after the bank's comments from levels around 360 before the rate decision. It traded at 361.75 at 1405 GMT, flat from levels seen late on Monday. The currency eased because "the strengthening of inflation risks could have justified a bigger rate hike," Gergely Suppan, analyst at Takarekbank wrote in a note. Hungarian bond yields on the long end of the curve rose by 3-4 basis points after the rate hike, a fixed-income trader said. The forint has given up nearly all its gains since the National Bank of Hungary (NBH) started tightening in June as it slowed the pace of rate rises last month despite raising its inflation forecasts. The Polish zloty gained, boosted by an increase in global risk appetite, but that "will be balanced by the persistent political risk on the Polish currency", Bank Millennium wrote in a note. A row between Warsaw and Brussels escalated this month when the Polish Constitutional Tribunal ruled that parts of the European treaties were incompatible with Poland's constitution, challenging a key tenet of European integration. The zloty was up 0.23% and trading at 4.5795 per euro. Elsewhere, the Czech crown eased 0.17% to trade at 25.524 versus the common currency. Stocks in the region eased, with Warsaw leading losses by weakening more than 0.5%. CEE SNAPSHO AT MARKETS T 1605 CET CURRENC IES Latest Previous Daily Change bid close change in 2021 EURCZK= Czech EURHUF= Hungary 0 % EURPLN= Polish % EURRON= Romanian EURHRK= Croatian % EURRSD= Serbian 0 % Note: calculated from 1800 daily CET change Latest Previous Daily Change close change in 2021 .PX Prague 1352.80 1354.540 -0.13% +31.71 0 % .BUX Budapest 54570.5 54637.92 -0.12% +29.60 9 % .WIG20 Warsaw 2446.84 2459.81 -0.53% +23.33 % .BETI Buchares 12658.6 12669.78 -0.09% +29.10 t 1 % .SBITOP Ljubljan <.SBITOP 1182.12 1179.16 +0.25 +31.22 a > % % .CRBEX Zagreb 2048.29 2042.40 +0.29 +17.77 % % .BELEX1 Belgrade <.BELEX1 791.08 788.52 +0.32 +5.67% 5 5> % .SOFIX Sofia 581.31 578.72 +0.45 +29.89 % % Yield Yield Spread Daily (bid) change vs change Bund in Czech spread Republic CZ2YT=R 2-year ps CZ5YT=R 5-year ps CZ10YT= ps Poland PL2YT=R 2-year ps PL5YT=R 5-year ps PL10YT= ps FORWARD 3x6 6x9 9x12 3M interba nk Czech 3.22 3.49 3.54 2.06 Rep Hungary 2.58 2.96 3.19 1.89 Poland 1.62 2.06 2.41 0.69 Note: are for ask FRA prices quotes ********************************************* ***************** (Additional reporting by Alan Charlish in Warsaw and Robert Muller and Jason Hovet in Prague; Editing by Krishna Chandra Eluri and Gareth Jones)