* Czech rates left flat at record low
* Bank to release new forecast, news conference at 1430 GMT
* Eyes on comments on FX, quantitative easing
* Crown firms 0.8 percent, rates up
(Adds analysts, updates crown, rates reaction)
By Jana Mlcochova
PRAGUE, Nov 5 (Reuters) - The Czech central bank kept
interest rates unchanged on Thursday, in line with analysts'
forecasts, after a weaker crown eased deflationary pressures and
data pointed to a moderate economic recovery.
The bank kept the main two week repo rate <CZCBIR=ECI>
<CZRP=>, used to curb excess liquidity, at a record low of 1.25
percent, a quarter of a percentage point above the European
Central Bank rate.
The crown firmed 0.8 percent against the euro <EURCZK=>
following the decision, to trade at 25.84 at 1244 GMT.
Interest rate swaps (IRS) rose 10-15 basis points on the
short end. Rates rose a similar amount on shorter-term forward
rate agreements (FRAs).
Analysts had predicted stable rates, although most said it
would be a close call. But interest rate markets were pricing in
a 65 percent chance of a 25 basis point rate cut, dealers said.
"The Czech central bank decision most likely reflects
signals that the global economy started to recover and to some
extent it might have also been impacted by the recent weakening
of the Czech crown," said Radomir Jac, chief analyst at Generali
PPF Asset Management.
The debate within the seven-strong governing board was
probably tough and the vote was likely not unanimous, Jac said.
The crown weakened by 3.2 percent between the last meeting
and the rate decision, following comments by Governor Zdenek
Tuma that the bank could consider intervening on the foreign
exchange market if the currency kept strengthening.
Markets would watch closely for any talk of possible
intervention or of the use of non-standard easing tools at a
central bank news conference due later on Thursday.
"Any piece of information that will arrive today will be
significant.. because if they don't come up (with non-standard
easing tools) today, then they probably will not do it any
more," said Pavel Sobisek, chief economist at Unicredit in
Prague.
The European Central Bank and the Bank of England both kept
benchmark rates flat on Thursday. Romania kept rates unchanged
on Tuesday due to political uncertainty.
Poland kept rates on hold last Wednesday showing a shift to
a neutral bias from an easing one. Hungary's central bank may
cut rates by 25 basis points to 6.75 percent later this month,
although some market watchers have said further weakness in the
forint may slow rate cutting or even halt it for some months.
NEW FORECAST
The central bank says the Czech economy has passed the worst
but sees a feeble recovery. It has slashed a total of 2.50
percentage points off borrowing costs since August 2008 as
inflation plummeted during the economic downturn.
The bank was due to release its new quarterly forecasts at
the news conference.
The headline revised inflation figure will include the
effect of indirect tax increases, part of the government
austerity package, which may put upward pressure on prices.
But the central bank, which is targeting headline inflation
of 2 percent plus or minus one percentage point from 2010,
excludes the primary impact of tax changes on prices from its
decision-making. Analysts said they saw other factors leading to
a lower inflation path than the 1.9 percent previously predicted
for the end of 2010.
(Editing by Ruth Pitchford and Lin Noueihed)
