(Repeats story published late on Thursday)
By Marek Petrus
PRAGUE, Oct 25 (Reuters) - The Czech central bank (CNB) board left interest rates unchanged for a second consecutive month in the face of a record strong crown, but made clear tighter policy was needed soon to tame a rise in inflation.
CNB policymakers kept the main two-week policy repo rate <CZCBIR=ECI> at a five-year high of 3.25 percent as most analysts expected. Five board members voted in favour of holding rates against two who wanted a 25 basis point hike.
Governor Zdenek Tuma confirmed widespread market expectations that further tightening was a matter of when, not if.
"(A hike) may happen next month or it may come at the beginning of next year, I am not able to foresee that," he told a news conference.
He said Thursday's no-change rate decision took into account the strength of the crown, a lower outlook for inflation net of tax changes, as well as rate-setters' belief that inflation expectations remained well anchored.
The CNB hiked rates by 150 basis point between October 2005 and August 2007 as it strove to contain building price pressures in an economy expanding at about 6 percent annual clip for the third year running.
The Czech rate stays at the lowest level in the European Union and 75 basis points below the euro zone equivalent.
"We believe this is likely to be only a pause in the monetary tightening cycle," said Jaromir Sindel, economist at Citibank in Prague.
HAWKISH BIAS
The CNB said its newly updated inflation forecast, putting the policy-relevant inflation measure net of taxes at slightly above its 3 percent target 12-18 months ahead, was "consistent with a rise in nominal interest rates".
Tuma said the bank's view of the economy's outlook had not changed significantly from the previous July forecast. Its outlook for 2007 economic growth was 5.8-6.6 percent, a narrower range than previously, and the 2008 growth estimate fell slightly to 3.9-6.1 percent.
Analysts said the CNB would delay rate hikes further if the crown remains strong.
"We think the forecast pointed to a rate rise by 25-50 basis points in the fourth quarter, and only the stronger crown in the past days prevented a rate increase (on Thursday)," said Jiri Skop, analyst at Komercni Banka.
"Should the crown hold onto to these stronger levels or firm even further, the CNB could postpone a rate rise into next year," he added.
The crown scaled a lifetime peak of 27.041 to the euro <0#EURCZK=> on Thursday, benefiting from the healthy economy which has made it a safe haven for investors exiting dollar investments on concerns over a U.S. economic growth slowdown.
The crown has firmed more than 6 percent against the euro since early July. The currency's strength tends to tame price pressures quickly and eat into Czech exports. The sum of exports and imports is the equivalent of 130 percent of economic output.
((Editing by Gerrard Raven; 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 RATES/
