* WHAT: Czech central bank interest rate decision
* WHEN: Thursday, Oct. 25, with announcement expected from 1000 GMT.
* Eleven of 16 economists polled by Reuters see repo rate staying steady at 3.25 percent, while rest expect a 25 basis point hike.
By Marek Petrus
PRAGUE, Oct 24 (Reuters) - The Czech crown's rise to record levels has reduced the chance of an interest rate rise on Thursday, despite central bank (CNB) concerns over resurgent inflation.
Markets widely expect CNB policymakers to hold the benchmark two-week repo rate at 3.25 percent <CZCBIR=ECI> for the second straight month at a monthly meeting on Thursday when a decision will be based on an updated quarterly inflation outlook.
In a Reuters poll last week 11 out of 16 analysts forecast no rate change. Five expected another quarter of a percentage point hike, but the crown's rally has led some of them to voice doubts about the likelihood of such move.
"Our baseline calls for no-change outcome on Thursday. The risk of a hike as early as this month nonetheless remains and we peg it at 20 percent," said Martin Lobotka, analyst at Ceska Sporitelna, which stuck to its forecast for a hike in January.
The CNB has tightened policy three times this year, with August's quarter-point move bringing the main rate to a five-year high as strong household spending growth feeds inflation in an economy expanding at a 6 percent annual clip.
However, the strong crown and uncertainty over the hit businesses and global economic growth could take from the credit and liquidity squeeze of recent months have made policymakers signal diminishing scope for near-term interest rate hikes.
The crown scaled an all-time peak of 18.89 to the dollar <CZK=> and hit a record of 27.12 to the euro <EURCZK=> on Monday, benefiting from a healthy economy which has made it a safe haven for investors fretting over a U.S. growth slowdown.
The crown traded at 27.17 to the euro on Wednesday afternoon, about 3.5 percent firmer versus the CNB's inflation forecast assumptions from July. As a rule of thumb, a 3 percent rise in the currency, if sustained, is equivalent to interest rate tightening by 100 basis points, say analysts at Sporitelna.
The crown's strength tends to quickly curb price pressures and eat into export sales in the Czech Republic, one of the most open economies in the world, with the sum of exports and imports accounting for 130 percent of economic output.
Jan Vejmelek, head of economics and strategy research at Komercni Banka, remained unconvinced that the rallying currency would delay a rate hike.
"It is apparent that the firming crown is anti-inflationary, which -- all other things being equal -- means a lower implied trajectory for interest rates," he said.
"However, the other things are not equal, and one can find a lot of lot inflationary factors. We still think there is a good chance of a rate increase on Thursday."
Annual inflation quickened to a 13-month high of 2.8 percent in September, and analysts expect it to jump above the 3 percent midpoint of the CNB's comfort zone as early as this month due to base effects, planned tax hikes and deregulations.
POLICYMAKERS' MOST RECENT STATEMENTS............[] PROFILES OF CNB BOARD MEMBERS...................[]
((Reporting by Marek Petrus; 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; editing by David Christian-Edwards))
Keywords: CZECH RATES/
