* C.bank chief outvoted on rates,
* Bank discussed currency-easing measures
* For TEXT of meeting minutes, click on []
(Adds details, market reaction)
PRAGUE, Oct 2 (Reuters) - Czech central bank chief Zdenek
Tuma was outvoted by the bank's board when it decided last week
to leave rates flat instead of lowering them, minutes from the
meeting showed on Friday.
The minutes showed that in the light of rates being already
low, the board discussed alternative ways to pursue a weaker
exchange rate and thus looser monetary policy.
This was the first time in recent years that Tuma has been
in a minority, showing the normally consensus-building governor
strongly felt the need to ease policy further as the economy
faces prospects of weak recovery.
The board voted 5-2 to leave rates flat at an all-time low
of 1.25 percent at the Sept 24 meeting. The other board member
voting for a 25 basis point cut was Vice-Governor Miroslav
Singer.
"The prevailing view in the board was that the resulting
balance of risks to the fulfilment of the August forecast was
anti-inflationary, although the members differed in their
opinions about the intensity of the risk," the minutes said.
"Some thought that the upside and downside factors were
broadly balanced, but opinions were also repeatedly expressed
that it was highly likely the inflation target would be
significantly undershot unless monetary policy was eased."
One of the anti-inflationary risks has been the firming
exchange rate, a key factor in the wide-open economy, and the
board discussed potential measures to weaken it.
That could be a rare intervention in the market, which the
bank normally does not interfere with unless there is a sharp
deviation from what it sees as a path justified by economic
fundamentals.
"Doubts were repeatedly expressed about whether an interest
rate reduction would, in the present situation, have the desired
effect on lending, the exchange rate and thus inflation at the
monetary policy transmission horizon," the minutes said.
"In connection with the potential continued build-up of
anti-inflationary risks, and with regard to the already limited
rate-lowering options of monetary policy, the board also debated
other monetary policy instruments that could be used to affect
the exchange rate dynamics and establish an easier monetary
policy," the minutes said.
The Czech crown dropped slightly after the minutes to a
session low of 25.475 to the euro <EURCZK=>, before returning to
25.455 where it traded before the release.
The crown has outperformed its peers this year, gaining 5.2
percent since January, while other currencies have weakened in
that time.
(Reporting by Jan Lopatka and Jason Hovet; editing by Stephen
Nisbet)
