* Analysts expect policy normalisation in the near future
* Data shows core inflation rising to 5-year-high in Jan
* Next central bank policy meeting due on Feb 26 (Adds detail)
By Sandor Peto and Gergely Szakacs
BUDAPEST, Feb 12 (Reuters) - Hungarian Prime Minister Viktor Orban nominated Gyorgy Matolcsy for a second six-year term as Governor of the National Bank of Hungary (NBH) on Tuesday as the bank approaches a pivotal moment following years of loose monetary policy.
Under Matolcsy, in charge since since March 2013, the central bank has implemented a range of monetary easing measures to curb borrowing costs and flood the economy with cheap credit to aid a government drive to boost growth.
The measures have slashed interest rates and led to a lending boom but core inflation has increased steadily in the past months and market participants expect the NBH to start tightening policy soon.
The nomination is in line with expectations after Orban said last month that “no surprises” were in store.
Data on Tuesday showed core inflation rose to a five-year-high in January, while the central bank’s own measure of core inflation adjusted for tax effects also reached its 3 percent medium-term target.
Central bank data showed market services prices adjusted for tax effects rising at the fastest pace in a decade.
“With Hungarian real rates among the lowest in EM, we have argued for a long time that it is not a matter of whether the NBH will tighten, but when,” Morgan Stanley economist Pasquale Diana said in a note.
“The global central bank trend has been undoubtedly dovish of late, but it is too difficult to ignore the trend in underlying Hungarian inflation, we think.”
The Monetary Council holds a non-rate-setting meeting on Tuesday, while the next policy meeting is scheduled for February 26. Matolcsy’s first term had been due to expire on March 3.
The Governor will have to be appointed by President Janos Ader after a nomination hearing in Parliament, which will likely be a formality given the two-thirds majority Orban’s ruling Fidesz party commands.
Some analysts say the central bank could signal how it plans to normalise monetary policy as soon as its March meeting, which will be the first policy session following Matolcsy’s reappointment. (Reporting by Sandor Peto and Gergely Szakacs; Editing by Catherine Evans and Angus MacSwan)