* Czech c.bank chief says discussed intervention
* Would consider stepping into mkt if crown keeps firming
* Crown slips to 3-week low vs euro after comments
(Adds quotes, market reaction, background)
By Toni Vorobyova
ISTANBUL, Oct 5 (Reuters) - The Czech central bank would
consider intervening on the foreign exchange market to weaken
the crown if the currency keeps firming, although the bank is no
fan of intervention, Governor Zdenek Tuma said on Monday.
Tuma told Reuters in a interview the bank discussed market
intervention, among other possible measures, when it last met to
discuss policy on Sept 24.
The bank cut interest rates to an all-time low of 1.25
percent in August, as the export-driven economy suffered from a
slump in foreign demand, and most analysts predicted the easing
cycle to be over.
The bank left rates flat at last month's meeting but Tuma
and his vice-governor Miroslav Singer voted for another 25 basis
point easing, sparking speculation the bank may cut once more.
The argument against easing was that rates were already low
and the effect of another cut was questionable, which prompted
discussion of alternative ways to ease policy.
"The question is whether we can loosen monetary policy in a
different way other than interest rate cuts," Tuma said.
"One option in an economy where the exchange rate risk is
quite important could be intervention in the currency market."
Tuma said the discussion may return when the bank's board
next meets on Nov 5.
"It's officially a managed float, so it means we reserve
that option in certain situations ... But otherwise we are not
fans of interventions, it's quite the reverse of what we have
been doing in the last 5 or 10 years."
Asked if the bank would consider intervening if the currency
continued to firm, Tuma said:
"Would consider. It doesn't mean it would do it. But it (the
bank) would consider all options, including interest rate cuts
and other potential scenarios."
The crown dropped 0.2 percent to a 3-week low after Tuma's
comments to 25.510 per euro <EURCZK=>, and stood over 5 percent
up since January.
Tuma also said he could hardly imagine that the bank's
inflation forecast, a key driver for monetary policy, would be
revised up in the next quarterly update at the November meeting.
The current forecast sees inflation gradually climbing up to
1.9 percent at the end of 2010, just below the bank's 2 percent
target.
(Writing by Jan Lopatka; Editing by Ruth Pitchford)
