(Repeats story published late on Thursday)
* Czech c.bank cuts rates by 50 bps, as expected
* GDP seen down 0.3 pct in 2009, first fall in a decade
* C.bank says rates may be near bottom, crown jumps
By Jan Lopatka
PRAGUE, Feb 5 (Reuters) - The Czech central bank slashed
interest rates by another half a percentage point on Thursday
and predicted the small European Union newcomer would slide into
recession this year for the first time in a decade.
The bank cut its main repo rate to 1.75 percent, matching a
record low reached in mid-2005 and 25 basis points below the
European Central Bank, which held rates flat on Thursday as
expected.
But Governor Zdenek Tuma also said the bank may be near the
end of the easing cycle, surprising a market which expected
rates to fall toward 1.0 percent in the coming months, and
sending the crown currency as much as 1.4 percent higher.
With consumers in their main export market, the euro zone,
snapping shut their purses and would-be borrowers increasingly
turned away by banks empty handed, all of ex-communist central
Europe's economies have watched once rapid growth hit a wall.
The Czech central bank predicted gross domestic product
would shrink by 0.3 percent in 2009 and grow by just 0.9 percent
in 2010 []. It saw inflation at 1.4 percent a year
from now.
"We have never before seen such pronounced and dramatic
anti-inflationary development," Tuma told a news conference.
"The decline is caused by all GDP components ... The bank
board saw risks rather in the downward direction."
Previous estimates were for 2.9 and 3.1 percent growth.
The rate cut brought cumulative monetary easing in the Czech
Republic to 200 basis points since August.
Analysts expect central Europe's worst off country, Hungary,
to slide deep into negative growth territory this year. Even
heavyweight Poland, which is less export dependent than the
Czechs or Hungarians due to a larger internal market and
stronger domestic demand, could face recession.
Analysts said sharply weaker currency rates across the
region would slow or halt rate cuts mainly in countries
struggling with large balance of payments gaps and large stock
of foreign currency loans.
"Pro-inflation pressures are connected mainly with the
affect of the weakening crown exchange rate. Therefore it cannot
be excluded that we have neared the bottom," Tuma said.
CROWN JUMPS
"I think the pace of easing will probably slow now," said
Neil Shearing of Capital Economics. "Central banks across the
region, particularly the Czech central bank, have been quite
aggressive so far."
The central bank said it predicted the Czech crown, which
has lost 5 percent so far in 2009, to trade at an average of
25.8 to the euro this year -- much stronger than today's levels.
The unit jumped to 27.92 following the statement.
"(The forecast) was pretty surprising to the market, along
with indications the rate cycle might be near an end," one
Prague trader said.
The crown has lost over 4 percent since the start of the
year, but it is still the best performer among central European
currencies, which have all suffered heavily as investors dumped
risky emerging market assets.
The crown has fallen 18 percent since its all-time peak last
July, when exporters suffered from what they said was
unsustainable currency strength.
The bank does not target any currency level, but pays close
attention to crown moves due to their significance for inflation
in its open economy.
(Additional reporting by Jason Hovet in Prague and Balasz
Koranyi in Budapest, editing by Patrick Graham)
