Czech central bank maintains easing pace with 50-bp rate cut

PRAGUE, June 27 (Reuters) - The Czech National Bank (CNB) cut its key two-week repo rate by 50 basis points to 4.75% on Thursday, maintaining its pace of policy easing despite expectations of a shift to caution amid lingering inflation pressures.

The decision, going against the majority of analysts in a poll who had expected a smaller 25-basis-point reduction, comes as other central banks in central Europe slow rate cuts or keep policy on hold amid lingering inflation pressures from service prices and uncertainty over major central banks' easing paths.

Czech markets had been factoring in a smaller rate cut on Thursday - after three straight 50-basis-point cuts previously - but rate setters had kept the option of a heftier reduction on the table, raising uncertainty among investors.

The Czech bank has now cut 225 basis points from its key rate since December, leaving it in what it calls restrictive territory while the fight to tame inflation that had surged to double digits in 2022-2023 remains in effect.

The headline inflation rate is now below 3% and within the tolerance band around the bank's 2% target.

However, prices in services have steadily risen by more than 5% each month this year, and wages are again growing in real terms, boosting consumer demand. The economy is recovering due to that after a slight contraction last year.

The bank board's statement and Governor Ales Michl's news conference at 3:45 pm (1345 GMT) are expected to provide more clues about the future rate path.

The median forecast in a Reuters poll saw the key rate at 4.00% by the end of the year, higher than in previous polls.

One factor for the outlook could be the crown, which has weakened in recent weeks but was still about 1% stronger than central bank assumptions in its most recent outlook going into Thursday's meeting.

Policymakers are also watching moves from the European Central Bank, which cut rates this month, and the U.S. Federal Reserve, which has yet to loosen policy. (Reporting by Jan Lopatka and Jason Hovet; Editing by Susan Fenton)