* Rates seen flat despite c.bankers' comments, CPI
* Cut unlikely to affect FX, but intervention possible
* For table please double click on []
By Mirka Krufova and Jana Mlcochova
PRAGUE, Oct 9 (Reuters) - The Czech central bank's easing cycle has ended,
despite weak price data and strong comments by some of its leading board members
suggesting the debate on rate cuts is not over yet, a Reuters poll showed on
Monday.
The question flared this month when bank Governor Zdenek Tuma and his deputy
launched a campaign against the crown, warning of protracted deflation if the
currency firmed too much and suggesting the bank could use non-rate tools to
prevent it.
But those comments sent the crown weaker and, after a majority of central
bankers outvoted Tuma and raised questions over whether another cut would
actually affect the domestic economy, analysts said the bank would still stay
put.
Twelve of 17 participants in the Reuters poll saw policymakers keeping the
two-week repo rate <CZCBIR=ECI> unchanged at a record low of 1.25 percent at
their meeting on Nov. 5.
The persistently uncertain economic outlook and lower-than-expected
September inflation data were not strong enough arguments to change that view,
with only five of those surveyed expecting a 25 basis point cut. []
"It's a very close call between an 'on hold' and a 25 basis point cut...
(but) I don't think that at this stage there's a reason to cut rates," said
Piotr Matys an economist at 4Cast.
"We've got comments by (deputy central bank Governor Miroslav) Singer and
Tuma but they have to be joined by the other interest rate setters... I doubt
they will manage to persuade the others from the board."
OTHER TOOLS
Mirroring developments elsewhere in Europe, the Czechs have shaved 2-1/2
percentage points off rates since August 2008, and until last month the debate
appeared closed as to whether the pendulum had reached the end of its swing.
But minutes from the Sept. 24 rate meeting showed members had raised the
prospect of further easing and the board discussed alternative ways to pursue a
weaker exchange rate and thus looser monetary policy. []
Following the minutes, Tuma said the bank would consider another cut or
direct market intervention if the crown kept firming. He said the bank had six
to seven ways of easing policy aside from rate cuts. []
[]
Singer, who voted with Tuma in a minority at the meeting to ease rates, said
the board was likely to discuss a cut again and may debate using several tools
simultaneously. []
Some analysts have said a decision will depend on the bank's quarterly
inflation forecasts, which should come out at the Nov. 5 meeting.
The bank has said risks to its 2010 inflation target of 2 percent plus or
minus 1 percent were on the downside, while September inflation data showing
zero price growth raised expectations that inflation could dip below zero this
autumn.
But for now, the crown strength has receded. Since the last minutes, the
unit <EURCZK=> has lost 2.1 percent to hit a two-month low.
That has tempered any expectations of looser rate policy, although seven of
those surveyed said the bank could use another tool to ease, with four expecting
currency intervention on top of a rate cut and three intervention but stable
rates.
"We are in a kind of liquidity trap now where further rate cuts will have
virtually no effect on the economy," said Peter Montalto, an emerging market
economist at Nomura who expects
flat rates.
"As such, keeping rates unchanged but starting some kind of
longer term repos/credit/quantitative easing is possible."
