By Jan Lopatka
PRAGUE, Oct 8 (Reuters) - Central European policymakers
stayed on the sidelines on Wednesday as the world's major
central banks eased policy in a concerted effort to relieve the
crisis-stricken global financial markets.
But the move boosted chances of looser monetary policy
across the region, where central banks have already neared the
end of tightening cycles due to receding inflation and flagging
growth.
In an attempt to stem unprecedented global market turmoil,
the Fed, the European Central Bank, the Bank of England and
others cut key rates by half a percentage point.
Central European financial systems have so far been somewhat
shielded from the turmoil, with currencies and stock markets
sliding but with no bank failures or forced bailouts and
generally stable inter-bank liquidity.
Czech central bank Governor Zdenek Tuma said the global cuts
were a "significant step" but refused to comment further. He
said, however, that the bank's board would decide whether to
discuss rates at a meeting on Thursday that was not specifically
set to touch on policy.
In Poland, where analysts have been expecting one more
interest rate hike in October to quell inflation and with an eye
on planned euro entry in 2012, central bankers said the policy
easing had limited the scope of their own tightening.
"In some sense, these decisions limit space for hikes in
Poland," Jan Czekaj, a key swing voter on the 10-strong Monetary
Policy Council told Reuters.
Hungary's central bank said inflation pressure could ease
and should be taken into account.
The Slovaks, who join the euro zone in January, left their
main policy rate at 4.25 percent for the time being, but they
must still converge with the ECB's rates before swapping their
crowns for the single currency.
"No change for now," central bank spokeswoman Jana Kovacova
told Reuters, refusing to elaborate.
RATE CUTS COMING
Analysts said the global rate cuts would feed into the
region's rate policies, which have already softened due to
improving inflation and eroding growth outlooks, although the
impact would be muted by domestic constraints.
"The direction in Czech rates is given and this can only
make it faster," said JP Morgan economist Miroslav Plojhar.
The Czechs became the first in the region to turn the
interest rate cycle with a 25 basis point cut in August to 3.50
percent, and falling inflation and growth is likely to bring
more easing at the bank's next meeting on Nov. 6.
"In Hungary and Romania the situation is not in favour of
cutting rates so both countries, and this is partially true in
Poland too, they have other problems too apart from the
approaching recession," Plojhar said.
"For them cutting rates means weakening of their currencies.
For these countries, unlike the Czech Republic, weakening
currency is negative rather than positive."
Regional currencies and stock markets initially gained from
the rate moves on hopes that global markets could see relief,
jump-starting the flow of investment back into emerging market
assets, but these moves were short lived.
(Additional reporting by Pawel Sobzak and Pawel Florkiewicz in
Warsaw and Martin Santa in Bratislava; Editing by Toby Chopra)
