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 decision kept Czech borrowing costs at a record low, with the main two week repo rate used to sterilize excess liquidity at 1.25 percent.

The crown firmed 0.6 percent against the euro following the decision, to trade at 25.900 at 1218 GMT.

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 for a 25 basis point rate cut, according to dealers.

The bank has predicted the highly open Czech economy had passed the worst but sees a feeble recovery.

The Czech bank has slashed a total of 2.50 percentage points from borrowing costs since August 2008 as inflation slumped in the economic downturn.

A 3.2 percent drop in the crown since the last rate meeting and data pointing to a gradual recovery were seen as arguments for stable rates, along with the expected upward price pressure from planned indirect tax hikes.

But an inflation fall to zero, a worsening labour market and the overall effect of the government austerity package expected to suppress demand, pointed to more easing.

The bank called a news conference for 1430 GMT to spell out reasons for the move. It will also release main highlights of its new quarterly macroeconomic forecast.

The market will be watching out for comments on other means than interest rates that could be used to ease policy -- such as foreign exchange interventions or quantitative easing, which had been mentioned by the central bank as a possibility in the past weeks.

The headline inflation revision will include the effect of indirect tax hikes, part of the government austerity package, which may put upward pressure on prices.

But the central bank, which targets headline inflation at 2 percent plus/minus one percentage point as of 2010, watches a measure of net inflation known as monetary policy inflation, which is adjusted for primary impacts from indirect tax changes.

(Reporting by Jana Mlcochova; Editing by Ruth Pitchford) Keywords: CZECH RATES

(prague.newsroom@thomsonreuters.com; Reuters Messaging: jana.mlcochova.reuters.com@reuters.net; +420-224 190 479)

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