POLL-Czech Dec CPI seen up 1.6 pct, near bottom of target band

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* When: Jan. 9 at 9 a.m. (0800 GMT)

* Annual inflation to tick higher to 1.6 pct

Czech inflation is likely to have remained below the bottom of the central bank's target tolerance band in December, boding well for expectations of flat interest rates near-term, a Reuters poll showed on Friday.

The median forecast in the survey among 12 economists was for the consumer price index (CPI) to hold flat month-on-month and rise 1.6 percent year-on-year , inching up from 1.5 percent in November.

"There is an upside risk to our, and probably also consensus, forecast, which anticipated that a cigarette tax hike will not show in consumer prices before the end of last year," said David Navratil, economist at Ceska Sporitelna.

A tax hike, which became effective from April last year, has not been expected to boost retail prices until early January because of the hoarding of old, lower-tax cigarette excise labels by producers and importers.

The consensus forecast keeps the annual inflation rate below the central bank's inflation goal, which has a tolerance range of one percentage point either side of the 3 percent mid-point.

Low inflation, a sharp rise in the crown in late 2006 and policymakers' dovish comments have led markets to bet that the central bank would pause in monetary tightening for a few more months after a quarter percentage point rate rise in September.

The crown has retreated from record highs reached at the end of last year but at Friday's levels around 27.700 per euro remained more than 2 percent firmer versus the initial assumption of the central bank's forecast drawn up in October.

"The crown poses a significant downside risk to the central bank forecast," said Navratil. "An interest rate increase will only come after an expected crown correction, sometime between March and April."

The CNB's forecast in October assumed a further gradual rate rise after 75 basis points worth of hikes etween October 2005 and September 2006 to prevent inflation from exceeding the 4 percent upper boundary of its comfort zone next year.

Overall, analysts expected that economic data due out in the coming weeks would re-inforce the picture of solid but non-inflationary economic growth in the European Union member country, which is increasingly propelled by consumer spending.

((FOR CONSENSUS FORECASTS FOR INFLATION AND OTHER INDICATORS, DOUBLE CLICK ON [ID:nL05703680]))

((Writing by Marek Petrus; Editing by Ian Jones; Reuters Messaging: rm://marek.petrus.reuters.com@reuters.net; e-mail: prague.newsroom@reuters.com or marek.petrus@reuters.com;

Tel: +420 224 190 477))

Keywords: CZECH ECONOMY/INFLATION

[PRAGUE/Reuters/Finance.cz]