* Borrowing costs kept at record lows
* Markets unmoved by the expected decision
* News conference at 1200 GMT
(Adds market reaction, analyst quote, background)
PRAGUE, June 23 (Reuters) - The Czech central bank left
interest rates unchanged on Wednesday, as expected, as the
central European state creeps forward with an export-driven
recovery marked by weak domestic demand and low price growth.
Rate-setters left the main two-week repo rate <CZCBIR=CEI>
at 0.75 percent, below the euro zone's 1 percent benchmark rate.
All 17 analysts in a Reuters poll said the bank would hold
rates at a record low, and they all said the next move would be
a 25 basis point hike. Five expect the rise during 2010, while
nine see it sometime in 2011.
Forward Rate Agreements <CZKFRA>, contracts betting on
future changes in interest rates, also priced in no change for
the rest of the year and about an 80 percent chance of a quarter
point hike in the first three months of 2011.
Markets were unmoved after the widely expected decision,
with the crown <EURCZK=> unchanged at 25.725 to the euro, up 0.2
percent on the day. Bonds and money market rates were also
unchanged.
Analysts said the latest developments tilted the balance of
risks to the bank's inflation forecast to the upside, though not
enough to hike.
"Since the last Central Bank meeting, a string of data has
developed in a pro-inflationary direction in relation to the
central bank's assumptions," said Raiffeisen Bank analyst Michal
Brozka. "On the other hand, chances for fiscal austerity has
risen, which is an argument to keep rates low for a longer
period of time."
The main policy rate is used by the central bank to
sterilise access liquidity from markets through operations with
a two-week maturity, based on an agreement on purchase and
buyback of securities.
Inflation in May came in 0.3 percentage points above the
bank's forecast. But adjusted readings excluding fuels show
price growth driven by demand was negative. Import prices, too,
had a disinflationary effect, the bank said this month.
Unemployment fell below 9 percent for the first time in half
a year, possibly helping household consumption, which surprised
on the upside, according to first quarter GDP data.
The bank called a news conference with Governor Zdenek Tuma
for 1200 GMT to explain the vote. It is the last session led by
Tuma who is leaving the bank at the end of June.
Vice Governor Miroslav Singer is taking over the governor's
post as of July 1.[]
Hungary's central bank also held rates stable on Monday, at
record low 5.25 percent, and gave no signal about the
possibility of further rate cuts. []
Poland's central bankers meet on June 30, and is expected to
keep rates unchanged at 3.5 percent.
(Reporting by Jana Mlcochova; Editing by Ron Askew)
