* Czech cbank cuts rates 25 bps to 1.5 pct, new historic low
* Bank revises fcasts, expects 2009 GDP to shrink 2.4 pct
* Cuts Q2, 2010 CPI fcast to 1.1 pct, from 2.1 pct
* Cbank gov says economic fall nearing end
(adds cbank forecast, background, analyst quote)
By Jana Mlcochova and Martin Dokoupil
PRAGUE, May 7 (Reuters) - The Czech central bank cut
interest rates by a quarter point to a historic low on Thursday
to fight a severe recession in the EU state, but said the worst
effects of the financial crisis on the economy had already past.
The move brought the main two-week repo rate to 1.5 percent
<CZCBIR=ECI> <CZRP=>, stable at 50 basis points above euro
zone's main rate after the European Central bank also cut its
key rate by the same amount.
The move was in line with analysts' expectations that the
flagging economy would prove to be a bigger concern than a weak
Czech crown and reflected a downgrade to the bank's economic
outlook for 2009. It now forecasts the economy to contract by
2.4 percent, from a 0.3 percent fall previously.
"The weakening of the Czech economy is continuing, and this
is the main reason why we decided to cut interest rates,"
central bank Governor Zdenek Tuma told reporters.
"The fact is that the economy has already registered the
biggest blow and it is trying to somehow digest it. And I expect
that in the coming quarters, the situation will be much better
than it was at the end of last year and in the first quarter."
He said he could not predict the direction of the bank's
next move on rates but that economic risks were balanced.
Analysts are also split whether this was the last cut in the
current easing cycle started in August, which saw the bank trim
the cost of money by a cumulative 225 basis points.
He also said a recovery could start at the beginning of next
year and the main shock to the economy appeared to be near an
end, a statement possibly backed up by data released on Thursday
by the Czechs and Hungary.
Both are suffering from a fall in euro zone demand for the
cars and electronic products they produce.
However, the data showed bigger than expected trade
surpluses in both countries and the 15.6 percent fall in
Hungarian output in March, though a painful number, was far less
dramatic than the 28.9 percent drop seen in February.
[]
Analysts said the figures could be a first sign of
improvement in the region, where an industry-led slowdown has
bled into the rest of the economy, driving up job losses,
hitting retailers, and causing banks to pull in the reins on
lending.
"We also think that the worst could be behind us, that the
economy is nearing the bottom," said Jan Vejmelek, chief
economist at Komercni Banka.
"We still expect a fall in the second quarter, but more
mild... So I would agree that there could be a stabilisation in
the second half and moderate growth in 2010."
Gross domestic product data for the first quarter is due out
on May 15. The bank also cut its forecast for headline inflation
to 1.4 percent for 2009, and Tuma said price growth would
continue to decline but stay in positive figures.
CROWN SEEN STABILISING
The Czech crown <EURCZK=> weakened 0.3 percent to 26.62
versus the euro after Tuma's statements, but dealers said some
investors may have booked profits ahead of a long holiday
weekend in the Czech Republic.
Tuma said the currency would stabilise after clawing back
some of its losses since the beginning of the year.
Analysts had said its weakness may have tempered the bank's
view on rates, because lower interest rates across the region
have driven down currencies in the region by making them less
attractive for investors. But the mood has calmed.
"There will be some correction of weakening and then
stabilisation," Tuma said. "We should assume that it should be a
certain reflexion of the calming down in sentiment surrounding
central and Eastern Europe."
The unit was 2.2 percent stronger from the last rate setting
meeting on March 26 when it closed at 27.11 per euro.
The central bank changed its forecast for the crown's rate,
putting it at 26.6 versus the euro this year and 25.9 in 2010,
from earlier forecasts of 25.8 and 25.6.
(Writing by Michael Winfrey; Editing by Toby Chopra)
