RPT-Czech c.bank rates seen on hold until at least March

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By Mirka Krufova and Marek Petrus

The Czech central bank (CNB) is likely to keep interest rates on hold in January and delay a further rise for at least two months with inflation below target and the crown firm, a Reuters poll showed on Thursday.

All 20 economists participating in the survey predicted the seven CNB policymakers would hold the key two-week repo rate at 2.50 percent on Jan. 25, when they will also update inflation projections for 12-18 months ahead.

"The CNB is unlikely to increase rates at this meeting, taking into account relatively low CPI and that the crown is close to all-time highs," said Miroslav Plojhar at Citibank in Prague.

"The (inflation forecast) report is likely to sound dovish."

Subdued inflation, a largely unexpected rise in the crown and policymakers' dovish comments have led financial markets to scale back expectations of credit tightening after 75 basis points worth of hikes between October 2005 and September 2006.

Three analysts predicted a quarter of a percentage point rate rise might come as early as March. Ten expected such an increase only in the second quarter. Six saw it delayed until the third quarter. One looked for steady rates this year.

The median forecast put the repo rate at 3.0 percent 12 months from now, unchanged from a similar poll last month.

Czech official rates have been the lowest in the European Union and a full percentage point below the euro zone equivalent, as the strong crown helps keep inflation at bay.

The crown has retreated from lifetime highs against both the euro and the U.S. dollar , seen in late December and early January, but remains 1.5 percent stronger than in the bank's most recent inflation prediction drawn up in October.

December annual inflation of 1.7 percent lagged the CNB's forecast by 0.7-0.8 of a percentage point and undershot the target, which aims at 3 percent but includes a tolerance range of one percentage point either side of that.

The CNB's October outlook assumed a gradual upward path for interest rates to prevent rising consumer spending from boosting inflation above the bank's comfort zone.

But new CNB board member Mojmir Hampl told Reuters this week that he expected updated inflation projections to show demand-pull price pressures remained muted, giving the bank room to hold rates steady for longer than thought earlier.

ANALYSTS' INDIVIDUAL FORECASTS.................[ID:nL18812506] RECENT CNB POLICYMAKERS' COMMENTS...............[ID:nL1839400] WHO IS WHO ON CNB POLICY BOARD.................[ID:nL18819946]

[PRAGUE/Reuters/Finance.cz]