PRAGUE (Reuters) - The Czech National Bank will refrain from raising interest rates on Thursday as uncertainties about European and global economic growth counter inflationary pressures stemming from the domestic economy, a Reuters poll showed on Monday.
The central bank raised its main two-week repo rate, currently at 1.75 percent, in five steps last year before it paused tightening in December.
The market had then almost unanimously expected the bank to resume hiking this week - nine out of 11 analysts forecast a February hike in a December Reuters poll.
But weak data and the outlook abroad have gradually shifted the view.
In the new poll, 12 of 14 respondents expected rates to remain unchanged. The remaining two saw a hike by 25 basis points to the level of 2.00 percent which would match the central bank's inflation target.
The poll also showed the pause may take longer - only three of the 12 respondents predicting no move this week saw another hike in March.
All seven board members will attend the Feb 7 meeting, where they will also debate a quarterly update to the macroeconomic forecast. The outlook is likely to show slower growth this year than the previously predicted 3.3 percent, and may also see lower inflation.
(Graphic: POLL-CZECH link: https://tmsnrt.rs/2TvzgrV).
The Czech labour market, at its tightest ever, has been pushing wages up, by 8.5 percent in nominal terms in the third quarter, boosting domestic consumption and investment.
However, the weaker European economy, U.S.-China trade wars and the risk of Britain crashing out of the European Union with no deal on their future relations are raising doubts, as expressed by vice-governor Tomas Nidetzky in a Reuters interview last week.
Since the break in raising rates in December, a newcomer to the board, Tomas Holub, said the pause might last into spring, while governor Jiri Rusnok has spoken about "zero to two hikes" this year.
"In recent statements, board members have expressed more dovish views and seem increasingly comfortable with putting further rate rises on hold for now. Combining the inflation and activity data with recent communication, we view a rate hike at the next meeting as highly unlikely," said Kevin Daly, analyst at Goldman Sachs.
The market does not have too much expectations either, as it is pricing in less than one increase of 25 basis points this year, according to the current inter-bank rate and forward contracts.
(Reporting by Mirka Krufova, Writing by Robert Muller, Graphic by Jason Hovet; Editing by Hugh Lawson)
