* Czech rates flat at record low, in line
* Crown flat at 26.110 vs euro <EURCZK=>
* News conference at 1330 GMT
(Adds crown reaction, background)
PRAGUE, Feb 4 (Reuters) - The Czech central bank kept
interest rates on hold as expected on Thursday, confirming
expectations for an end in policy easing after data showed the
economy was slowly improving and more cutting was unnecessary.
The seven-strong governing board left rates at a record low
with the main two-week repo rate <CZCBIR=ECI> <CZRP=> used to
drain excess liquidity at 1 percent.
All 21 analysts surveyed by Reuters had predicted the bank
would stay put in February. Eleven saw a hike coming in the
third quarter and six saw a tightening already in the second
quarter.
The crown <EURCZK=> was unchanged following the decision,
trading at 26.110 per euro.
The bank called a news conference for 1330 GMT to spell out
reasons for the decision. It will also unveil its new quarterly
macroeconomic forecast.
"The afternoon news conference and data from the new CNB
forecast will be interesting," said Michal Brozka, an analyst at
Raiffeisenbank in Prague. "It should reflect higher current
inflation, a weaker Czech crown, and a better outlook of
economic recovery abroad."
"For now we are counting on the Czech national bank taking a
careful approach towards raising rates and see the first hike to
the main interest rate to 1.25 percent in the third quarter."
Money market rates, though, have priced in the first hike
for the end of June. Overall, markets price in three quarter
point hikes by the end of the year, dealers say.
The Czech Republic, reliant on exports to the euro zone, is
slowly recovering from the worst economic downturn in decades.
Business sentiment and output data from the turn of the year
showed an improvement, which some analysts said could be
sustained, but weak domestic demand caused by rising
unemployment and tax hikes is expected to keep a lid on the pace
of revival.
Its November forecast predicted a double-dip recovery, with
a second, shallower decline coming in the fourth quarter of this
year. Many analysts expect an upward revision in this year's
growth expectations, seen at 1.4 percent in the old forecast,
and a shallower second dip in the growth pattern.
The bank targets inflation measured by consumer price index
at 2 percent with a tolerance of +/- 1 percentage point, and
looks 12-18 months ahead when it sets rates, by which point
demand pressures are expected to pick up.
The Czechs have the lowest rates in central Europe. Polish
borrowing costs are at a record low 3.5 percent and should stay
there for several months before rising in the second half.
Hungary's bank cut its key base rate <NBHI> by 25 basis
points in January to 6.0 percent and is expected to continue
easing to help the economy recover from a deep recession.
The European Central Bank also meets on rates on Thursday,
with a decision due at 1245 GMT. It is expected to leave rates
unchanged with the main rate at 1.0 percent.
(Reporting by Jana Mlcochova; editing by Patrick Graham)
