UPDATE 2-Czechs lift rates, may stay put in coming months

                                
 (Adds comments, updates crown)
                                
 By Jan Lopatka
                                
 PRAGUE, Feb 7 (Reuters) - The Czech central bank raised
interest rates by 25 basis points as widely expected on Thursday
to tame inflationary pressures, possibly the last hike in its
two-year tightening cycle.
                                
 The increase brought the key two-week repo rate to 3.75
percent, 200 basis points up since 2005, pushing the crown
currency back up near all-time highs seen earlier in the day.
                                
 The Czech move followed three other central banks in central
and eastern Europe that tightened the monetary screws over the
past week, while the Bank of England loosened policy due to
growth concerns and the European Central Bank made no change.
                                
 Czech rates remain the lowest in the EU and below the
current inflation rate but analysts said they may possibly not
go any higher due to an expected slowdown in both foreign and
domestic demand, especially if the currency remains strong.
                                
 The bank gave no details on its decision but called a news
conference for 1430 GMT.
                                
 "This was a widely expected decision," said David Marek,
chief economist at Patria Finance. "Given what is happening in
the world, this may be the last hike."
                                
 The crown briefly firmed to 25.560 to the euro <EURCZK=>
after the decision before returning to an earlier level of
25.610, a whisker below an all-time high of 25.545 seen on
Thursday morning.
                                
 The crown has gained 9.4 percent to the euro over the past
12 months as exports grew and the Czech negative interest rate
spread versus the euro zone narrowed to 25 basis points,
following the Thursday's decision.
                                
 Inflation jumped to 5.4 percent in December, far above the
central bank's target of 3 percent +/- 1 percentage point, and
analysts expect it to surpass 6 percent in January. The data is
due out on Friday.
                                
 
                                
 ENOUGH HIKES?
                                
 Inflation has been on the rise throughout central Europe,
where strong economic growth has added to global price pressures
arising from commodity prices.
                                
 The bank has said the jump was caused mainly by matters
outside the control of monetary policy, such as food prices and
a hike in the sales tax in January.
                                
 Central bankers have said the inflation spike was temporary
and price growth would drop back to targeted levels in about a
year.
                                
 "If wage negotiations reflect current inflation, which
probably rose above 6 percent in January, the inflation rate may
stay above target longer than (the bank) would be pleased with,"
said Raiffeisenbank analyst Michal Brozka.
                                
 "However we believe that the current level of interest rates
is sufficient for taming inflation and we do not expect further
growth," he said.
                                
 Analysts expect cuts in some welfare payments and the value
added tax hike to limit household demand, helping to slow the
country's economic growth rate to about 5 percent from over 6
percent last year and cool inflation.
                                
 The central bank will release its new quarterly inflation
forecast at the news conference on Thursday and also a
non-binding trajectory of future interest rates.

- For a FACTBOX on CEE interest rates, click on [ID:nL18922075]
- For Czech interest rate forecasts, click on   [ID:nL01301640}]
 (editing by Tony Austin)