* 10 out of 17 analysts see cut at June 25 meeting
* Most see no more cuts after that
* For table double click on []
By Mirka Krufova
PRAGUE, June 19 (Reuters) - The Czech central bank will cut
its main policy rate by a quarter point to a new all-time low
next Thursday, reflecting a deep output drop in the central
European economy, a Reuters poll showed.
Czech rate setters have slashed borrowing costs by 225
basis points since August, supporting the economy that
contracted by a record 3.4 percent after years of fast growth.
Ten of the 17 analysts polled by Reuters saw the central
bank trimming the main two week repo rate used to drain access
liquidity by 25 basis points to 1.25 percent.
Seven in the poll taken between June 16 and June 19 saw
rates unchanged.
The euro zone benchmark rate stands at 1 percent, also a
record low.
"The economy is significantly weaker than what the bank
assumed, which is a downward risk for rates," said Martin
Lobotka, an economist at Ceska Sporitelna who predicted a 25
basis point cut now and a hike of the same size in the first
quarter next year.
"The crown exchange rate grew sensibly (after a volatile
first quarter) so it isn't such a big risk and finally the
interbank market still does not work as it should, the risk
premium is still above what the bank expects," he said.
The crown <EURCZK=> had been weaker on average than expected
by the bank. But it has settled in a band between 27.40 to 26.30
per euro since April 1, close to the bank's full-year average
assumption of 26.6 per euro.
The unit jumped to a six-week high against the euro on
Thursday and held strong on Friday, trading at 26.370.
Most analysts believe the June cut will be the last in this
easing cycle and only one saw rates hitting 1 percent. Nine saw
a turnaround next year with five predicting a quarter point hike
already in the first quarter.
Other central banks in the region meet on rates next week.
Policy makers in Hungary on Monday are expected to keep rates
unchanged to protect the fragile forint []. The
Polish central bank will likely cut on Thursday as inflationary
pressures have eased [].
VOTE MIGHT BE TIGHT
Some central bank watchers said the June vote was
particularly difficult to predict.
The vote may be complicated by the absence of vice-governors
Mojmir Hampl and Miroslav Singer, who both voted for a cut at
the May 7 meeting, which endorsed a rate cut by 5-2 vote.
Inflation, targeted by the bank, was 1.3 percent up in May,
just a tic above the bank's latest May 7 forecast.
Analysts said the deviation from the forecast was too small
to matter but some said the bank should be cautious.
"Inflation is so far a touch above the central bank
forecast, so we do not think that the bank should claim that
anti-inflationary risks are prevailing at the moment, especially
in a situation where monetary conditions are easing
autonomously," said Radomir Jac, an analyst at Generali PPF
Asset Management.
Jac, who saw stable rates for the rest of the year and a 25
basis point hike in the first quarter next year, said money
market rates were easing even without a central bank cut.
(Additional reporting and writing by Jana Mlcochova; Editing by
Andy Bruce)
