WRAPUP 1-Central Europeans hike rates as inflation jumps

                                
 By Jan Lopatka
                                
 PRAGUE, March 26 (Reuters) - The Polish and Romanian central
banks raised interest rates on Wednesday and Hungarian
policymakers were poised to follow suit to combat accelerating
inflation in central and eastern Europe.
                                
 The tightening moves highlighted how short-term policy needs
in the fast-growing region -- which has yet to see a significant
impact from the global credit crunch -- differ from those in
western Europe and the United States.
                                
 Global inflation driven by rising food and fuel prices has
put policymakers in many EU newcomers on a hawkish slant, and
some see price growth as the biggest challenge to their plans of
adopting the single European currency by next decade.
                                
 They are also fighting domestic wage pressure as foreign
firms build new factories and compete for workers, driving
consumer demand and boosting living standards in the region's
race to catch up with the richer West.
                                
 The markets expect Hungary, which has battled an ugly
combination of high inflation and weak growth, to raise the cost
of money on Monday from its current 7.5 percent.
                                
 Czech central bankers voted 6-1 to leave rates flat earlier
in the day, taking comfort from a fast rise in the crown
currency that analysts said had done the policy-tightening job
in their stead.
                                
 Analysts said the tightening cycle could be reaching a peak
-- or at least a pause -- in many countries in the region as the
western European economic slowdown will eventually be felt
although a shift towards easing was very unlikely soon.
                                
 "You will see that the ECB rhetoric is shifting from the
hawkish, playing up inflation concerns, to become a little bit
more concerned about growth," said Michal Dybula, an economist
at BNP Paribas in Warsaw.
                                
 "That will not be supportive for carrying on the tightening
process here in the region." 
                                
 
                                
 PAUSE SEEN IN POLAND, ROMANIA AN EXCEPTION
                                
 The Polish central bank raised its key rate by a
quarter-point to 5.75 percent, the seventh hike since last April
as inflation jumped to 4.2 percent in February ([ID:nL26888335]
for story).
                                
 "For now we believe that another hike soon (in April) is
unlikely. We assume the pause in monetary tightening will last
till June, when the rate will be lifted to 6 percent," said
Marta Petka, an economist at Raiffeisen in Warsaw.
                                
 Romanian central bankers lifted the main rate by 50 basis
points to 9.5 percent, meeting market expectations, after
inflation hit an almost two year high in February of 8 percent
[ID:nLL26266498].
                                
 Boosted by rampant domestic demand, hefty rises in energy
and food costs and a weakened leu currency, price growth is
expected to peak at around 8.5 percent in March, compared with
the central bank's end-year target of 2.8-4.8 percent.
                                
 Romania, with its yawning current account gap, is most prone
to further tightening in the region, analysts said.
                                
 "The central bank is likely to do whatever is needed to keep
the euro/leu below a psychological level of 4.00, including
raising the base rate to double-digit territory," said Miroslav
Plojhar, EMEA economist at JP Morgan.
                                
 "Currently, we expect the bank will have to increase the
rate to 12 percent by end-2008." The leu showed little reaction
to the decision, trading at 3.71 per euro <EURRON=>.
                                
 
                                
 CROWN HOLDS CZECH RATES BACK
                                
 The Czech central bank (CNB) left its main rate at 3.75
percent, as expected, following five hikes since mid-2007
[ID:nL26463955].
                                
 Czech inflation has also soared, reaching 9-year highs of
7.5 percent year-on-year in January and February, but the
central bank (CNB) said it had been driven by one-off factors
such as tax hikes and should fall sharply by early 2009.
                                
 "Slower private consumption growth in 2008, together with
continued expectations of an economic slowdown in the industrial
countries and a further Fed and ECB easing in interest rates
support our view of an unchanged CNB policy rate in 2008," said
Jaromir Sindel, chief economist at Citibank in Prague.
                                
 The crown <EURCZK=> has pulled back from all-time highs
against the euro on March 4 but still stands 8.5 percent up from
a year ago.
                                
 The Slovak central bank left rates parked at 4.25 percent
for the 11th month in a row on Tuesday, eyeing euro entry next
year. By then the bank needs to align its policy with the ECB's
rates, now at 4.0 percent but seen down later this year
[ID:nL25730687].
 (Additional reporting by Justyna Pawlak and Radu Marinas in
Bucharest and Patryk Wasilewski in Warsaw; Editing by Michael
Winfrey)