* Czech c.bank expected to cut rates by 50 bps on Dec. 17
* Three analysts see 25 bps move, two expect 75 bps
* Further easing seen at Feb meeting
By Jana Mlcochova and Mirka Krufova
PRAGUE, Dec 12 (Reuters) - The Czech central bank is expected to trim
interest rates by a half a percentage point as the euro zone recession begins to
weigh heavily on the country's export-reliant growth, a Reuters poll showed on
Friday.
Policy easing by major global central banks and a rapid drop in inflation
further underscore the case for lower Czech rates, analysts said.
All 15 analysts in the poll, taken between Dec. 10 and Dec. 11, said the
central bank would cut at its Dec. 17 meeting in what would be a fourth cut
since August, when a tightening cycle peaked with the rate at 3.75 percent.
Ten predicted a 50 basis point reduction, bringing the key two-week repo
rate to 2.25 percent, back to a level last seen in since July 2006, and below
the euro zone's 2.50 percent.
Czech inflation fell to 4.4 percent year-on-year in November, down sharply
from 6.0 percent in October, and well below the bank's estimate of 5.5 percent.
A sharp drop in October industrial output also pointed to a major
contraction, while industrial prices dropped further than expected
[], data showed on Friday, further boosting the case for monetary
policy easing [].
"A bigger-than-expected-deceleration in industrial producer prices,
appalling industry, as well as other data released this week, such as a drop in
consumer prices, faltering exports and weak third quarter GDP, point monetary
policy only in one direction at the moment -- downward," said Michal Brozka, an
analyst at Raiffeisenbank.
The Czech central bank had kept borrowing costs in the fast growing
ex-communist economy below those in the euro block, somewhat taming the
fast-appreciating crown.
But a December cut by 75 basis points by the ECB put the Czech cost of money
above that of the euro zone's for the first time since early 2005. Czech central
bank board member Robert Holman has since said the move was among reasons for
the Czechs to ease too [].
Citibank analyst Jaromir Sindel agreed: "Reflecting Citi's forecast of a
further easing in the ECB's main interest rate to 1 percent in mid-2009, we
expect a sharper reduction in (Czech) interest rates."
The central bank could set a new historical low for Czech borrowing costs by
lowering them below 1.75 percent early next year, he said.
Holman's comments added to dovish views express by fellow central bank
board members Mojmir Hampl and Vladimir Tomsik.
Vice-Governor Hampl told Reuters he would vote for a cut this month
[], and board member Vladimir Tomsik said inflation was falling
faster than expected, although he said he could not estimate how much the
predicted rate path would drop.
Governor Zdenek Tuma said he did not expect any surprise after an unexpected
75-basis-point reduction last month, but warned the bank's growth outlook may be
too rosy [].
Central banks across the region have been cutting the cost of money,
following the world's major policy makers as the economic downturn filters
through to their economies.
Hungary hiked rates by three percentage points to defend its currency in
October but has since lowered them, last with a surprise 50 basis point cut on
Monday.
Poland's central bank ended its tightening cycle in November with an
unexpected quarter-point cut and is expected to ease again this month.
Czech policy maker Pavel Rezabek, whom the market sees as the biggest dove
on the seven-strong policy board, will miss the meeting.
For TABLE please click on .....................[]
(Editing by Andy Bruce)
