Budapest - Hungary's central bank is expected to raise its key interest rate by 25 basis points to a three-year high of 8.25 per cent next Monday, a poll of analysts found.

The median consensus of the poll of 21 analysts by financial website portfolio. hu found a 25-basis-point hike the most likely scenario, although several believed the central bank could possible hike to 8.5 per cent.

The bank hiked rates by 50 basis points to 8 per cent last month, with governor Andras Simor citing long-term inflationary pressures and global economic problems caused by the US recession. The hike was the first in six months and came as inflation remained high.

Economic reforms instituted by the government - including tax rises, energy price hikes and spending cuts - forced inflation up to a high of 9 per cent last March. It has been slow to come down, and remained at 6.9 per cent in February.

The government recently bumped up its official inflation prognosis for 2008 to 5.9 per cent.

Recent official figures showing that gross average wages grew by 13.4 per cent year-on-year in February after a January slowdown have also pumped expectations of a hike.

A crisis in the governing coalition with the potential to bring about early elections or at least cause a governance crisis has not helped matters.

The Alliance of Free Democrats, junior partner in the government coalition, is expected to quit government next week following a disagreement over the speed of economic reforms.

The economic reforms are aimed at cutting the budget deficit and ultimately getting Hungary ready to adopt the euro. They have so far cut the budget deficit from 9.2 per cent of the GDP in 2006 to an estimated 5.5 per cent in 2007.

However, as well as forcing inflation up, they have hit economic growth - which slowed to 1.3 per cent in 2007 from 3.9 per cent the previous year and is expected to only just top 2 per cent in 2008 as consumption fails to recover. (dpa)