(Repeats story published on March 19)
* Czech cbank seen holding rates steady at March 26 meeting
* Half of analysts polled see a rate cut by June
By Mirka Krufova and Jana Mlcochova
PRAGUE (Reuters) - The Czech central bank is expected to
take a breather in its policy easing cycle in March as a weak
crown currency threatens to fuel inflation pressure, a Reuters
poll showed on Thursday.
But half of analysts polled said the bank will cut again by
June as the growth outlook erodes and inflation hits new lows.
The bank has cut rates by 200 basis points in four moves
since August last year, bringing the main two-week repo rate to
1.75 percent, a record low in Czech borrowing costs.
Thirteen of the 16 analysts polled between March 16 and
March 19 expected stable rates at March 26 meeting, and three
saw a 25 basis point cut.
Eight saw a quarter point reduction in the second quarter,
of whom four think the cut could come as soon as in May.
"It seems to us that the central bank will be reluctant to
ease monetary policy further despite (the) economic slowdown,"
said Piotr Matys, emerging markets analyst at 4cast. "The main
reason is the Czech crown. The bank officials are concerned that
significant depreciation could fuel pressure on inflation."
The Czech crown <EURCZK=> weakened to as much as 29.69 per
euro in mid November, the weakest since October 2005, before
recovering to trade at 26.78 per euro at 1350 GMT on Thursday.
The currency has plunged from a record high of 22.925
reached in July as the central European manufacturing-based
economy hit the brakes due to a collapse in Western demand. The
bank forecasts the average 2009 exchange rate at 25.80 per euro.
The Czech economy shrank by 0.9 percent in the final quarter
of last year, the worst since 1997, while exports slumped 24
percent year on year in January, the worst result since 1993.
The central bank's latest forecast sees economy contracting
by 0.3 percent this year. It expects growth to resume at 0.9
percent in 2010.
In February, central bank head Zdenek Tuma told Reuters he
could "hardly imagine" another cut due to the weak crown.
But board member Robert Holman said on Monday he expected
the bank to cut its growth forecast to predict a 2 percent
economic contraction this year, which analysts said could signal
another potential cut.
"Monetary policy is squeezed by two opposite forces: the
gloomy economic outlook calls for further monetary easing while
extreme FX volatility can deter the central bank from interest
rate changes," said David Marek, an economist at Patria Finance.
"However, recent negative figures from Germany, other euro
zone countries and a fall in exports and industrial orders in
the Czech Republic suggest that we have not reached the end of
the easing cycle," he said.
Central banks in neighbours Poland and Hungary will also
hold rate setting meeting next week.
For a TABLE showing forecasts double click on []
(Writing by Jana Mlcochova; Editing by Toby Chopra)
