By Jason Hovet and Jan Lopatka
PRAGUE, Dec 19 (Reuters) - The Czech central bank left rates at next to zero on Wednesday but defied some expectations it would intensify moves to weaken the crown currency to spur spending among recession-hit consumers.
Since cutting rates to what the bank called a 'technical zero' of 0.05 percent on Nov. 1, Czech rate setters have said 10 times that knocking the crown lower through market intervention would be their next preferred easing tool.
And with the country of 10.5 million stuck in its longest economic contraction in 15 years and consumer price growth sliding faster than expected, economists had wondered whether the bank would enter the market before mid-2013.
But rather than pushing forward on that front, central bank Governor Miroslav Singer said only that risks to the bank's forecast had shifted from 'balanced' to 'slightly anti-inflationary', a factor partially mitigated by weakness in the crown.
'The forecast assumes looser monetary conditions... round the middle of next year,' Singer said.
'It seems to us that the mixture of the numbers points a tiny bit in the anti-inflationary direction versus the forecast, but fundamentally it is not significantly different.'
In a Reuters poll this month, 13 of 18 economists said they expected the bank to intervene against the crown at some point.
Of those, nine said weak data since November could prompt the bank to move up the timing of this to the first quarter of 2013, rather than at around mid-year as projected in the bank's mid-term forecast.
But the crown has hardly reacted, showing a mild 0.6 percent drop this quarter, although it firmed slightly after Wednesday's news conference to 25.2 against the euro.
'It's possible that the market was counting on some kind of verbal intervention,' Raiffeisen wrote in a note.
'Direct interventions from the CNB should come only when the situation worsens further or if the crown firms significantly past than the CNB prognosis.'
Economists say the Czechs are now probably in a sixth quarter of a double-dip contraction that has squeezed output back to below the record level it reached before the global economic crisis.
One of the main causes of the recession is a two-year government austerity campaign to rein in the budget deficit. It pushed wages down and stoked unemployment, putting typically thrifty Czech consumers on the defensive. It has also prompted companies already feeling the impact of the euro zone crisis to cut investments.
The two factors have overwhelmed marginal growth in the export industries that dominate the economy.
The Czechs are hardly alone, as central banks across Europe deploy looser policy to stimulate their sagging economies.
On Tuesday, Hungary's central bank cut its main interest rate to 5.75 percent, and Poland cut to 4.25 percent on Dec. 5 and signalled more lowering to come.
But while those central banks say they are easing to boost growth, the Czechs have focused on a weaker crown in terms of inflation-targeting.
A weaker crown would translate into higher prices of imported goods and also raise exporters' income. Higher inflation would also help spur falling demand, a problem the bank attributes to Czechs boosting savings in the economic downturn.
(Editing by Michael Winfrey and Jeremy Gaunt) Keywords: CZECH RATES/
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