UPDATE 1-Czech central bank leaves rates flat as expected

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PRAGUE, Sept 27 (Reuters) - The Czech central bank (CNB) left interest rates flat at its monthly policy meeting on Thursday, in line with expectations it would halt its tightening drive for at least a month on the back of a firming crown.

The bank left the key two-week repo rate unchanged at 3.25 percent, taking a pause after three quarter-point hikes in the past four months.

The CNB gave no comment on its decision but called a news conference for 1330 GMT.

Analysts expected the bank to keep rates on hold mainly due to the crown's advance to all-time highs against the euro and the dollar in the past month.

A strong crown dampens import prices and is a key inflation driver in the small, open central European economy.

It climbed as high as 27.385 to the euro earlier this month, driven by risk aversion which led to unwinding of carry trades using the crown or the yen as funding currencies to hold positions in higher-yeilding assets.

The crown traded at 27.595 to the euro at 0932 GMT, unchanged from just ahead of the rate decision.

This compares with a central bank forecast of around 29.0-28.2 to the euro, according to calculations made by analysts using data from the bank's quarterly inflation prognosis in July.

Another anti-inflationary factor is the global credit crunch that is casting a shadow over the economic growth and interest rate rise outlook in the euro zone.

However, price pressures in the fast-growing Czech economy are rising and analysts expect more interest rate tightening in the coming months.

The Czech labour market has been drying up with companies reporting difficulties in recruitment, household spending has been rising as wages grow, and food prices have been .

A Reuters poll last week [ID:nL:20199732] showed most analysts expected one more tighteningby the year end, and the 12-month forecast called for the repo rate to rise to 3.50-4.25 percent.