* Czech Feb inflation below expectations at 1.7 pct yr/yr
* Romanian inflation above forecast, quickens to 8 pct
* Czechs seen maybe raising rates in Q2, Romania rates flat
By Michael Winfrey
PRAGUE, April 11 (Reuters) - Consumer prices rose by less
than expected in February in the Czech Republic but surged in
Romania, strengthening arguments for both countries to keep
rates on hold for now despite diverging price pressures.
After the European Central Bank's move to tighten monetary
policy last week in the face of rising global commodity prices,
markets are closely watching central banks in the European
Union's emerging East for signs they may follow.
But aside from Poland, where policymakers hiked rates by a
quarter point last week, most look to be on hold for now, with
the Czechs probably putting off a hike because of weak demand
and the Romanians avoiding previously expected cuts as food and
fuel prices hit consumers' wallets more than expected.
Czech consumer prices rose by a lower-than-expected 0.1
percent in March from February, and the annual inflation rate
was 1.7 percent, below the central bank's 1.9 percent forecast
and the market's 1.8 percent prognosis.
Romanian inflation quickened to 8 percent in March. With
food, fuels and energy making up more than 50 percent of the
country's inflation basket, the poor Balkan state is more
exposed to commodity shocks than its more developed EU peers.
Price growth there has eclipsed the central bank's 2-4
percent inflation target and dashed forecasts from earlier in
the year that rate setters could lower the 6.25 percent base
rate to help spark growth in Romania's moribund economy.
"The figures are lowering chances for a rate cut this year,"
said Melania Hancila, chief economist at Volksbank in Bucharest.
"The economy is still facing aggregate demand deficit and
consumption can be stimulated only through monetary policy
relaxation."
Most analysts now expect Romania's central bank to keep
rates on hold until the end of the year. <RO/POLL1><RO/POLL2>
The Czech crown <EURCZK=> and Romanian leu <EURRON=> both
edged up slightly after Monday's data. []
CZECH RATES
The Czech annual figure fell from 1.8 percent a month
earlier and remained firmly below the central bank's target of 2
percent plus or minus one percentage point.
Despite double digit growth in industry in the small
export-based economy, Czechs have yet to resume their pre-crisis
spending patterns, with the sales of retail items and homes, as
well as new loan applications, remaining subdued.
That may have picked up slightly in the first quarter, with
data last week showing a rise in car registrations and a
higher-than-forecast rise in retail sales, as well as an
unexpected fall in unemployment to 9.2 percent.
Analysts said that, despite having their main interest rate
half a point lower than the ECB's at 0.75 percent, Czech rate
setters would probably not hike interest rates at their next
meeting on May 5, although a rise could happen before mid-year.
"(The) chances for a Czech National Bank interest rate
increase in the second quarter are improving, despite the fact
that inflation is low at the moment," said Radomir Jac, chief
analyst at PPF Asset Management in Prague.
"It may wait with the first rate hike until its June meeting
in order to have full information about first quarter gross
domestic product."
Three members of the Czech central bank's seven-member board
have suggested they could vote for higher interest rates soon,
but last week deputy Governor Mojmir Hampl said demand was
weaker than anticipated. Most analysts expect the bank to raise
interest rates by a quarter point at around mid-year.
(Editing by Ruth Pitchford)
