* Borrowing costs maintained at record low
* One vote for rate hike, but most see risks balanced
* Fiscal tightening may allow looser policy in the future
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By Jana Mlcochova
PRAGUE, Sept 23 (Reuters) - The Czech central bank kept interest rates flat on Thursday as expected and stuck to its outlook for stable policy although one board member advocated a rate hike, the first voice for tighter policy in over two years.
Czech rates dropped to an all-time low in the economic crisis, with the final cut to 0.75 percent in May this year, and the bank expects loose policy to prevail until gradual hikes form the second half of the next year.
Governor Miroslav Singer said some board members talked about prevailing pro-inflationary risks but said the majority of the 7-strong board saw the risks to the inflation forecast, which is the main driver for policy, to be balanced.
"At the moment the development corresponds to what we had expected," he said.
The "balance" of risks is a shift from the description of "slightly anti-inflationary" the bank used after its previous meeting on Aug 5, but Singer said none of the risks on either side was large.
The strong crown, which has gained 7 percent against the euro this year, is an anti-inflationary factor, he said.
The new centre-right government's fiscal cuts will have an impact and, other things equal, could lead to looser policy in the future than the bank would assume, but not on the horizon of this or next year.
The bank said data from the real economy, including output, the labour market and commodity prices, were pro-inflationary risks. "On the pro-inflationary risk..., unemployment is slightly lower than we had expected," Singer said, adding this could push inflation higher.
"But we do not overestimate that. None of the risks seems to be significantly dramatic at the moment," he said.
RATES ON HOLD FOR SOME TIME
The crown
Chief Economist Pavel Sobisek of UniCredit Bank in Prague said he did not believe the bank would raise Europe's third lowest borrowing costs sooner than in the second quarter of 2011.
"If there was some change in the pro-inflationary direction, it was mainly short-term factors such as food prices, which the central bank cannot influence much by its policy," he said.
"On the other hand we have a chance for a more significant tightening of fiscal policy, which is relevant factor for monetary policy."
The government approved a 2011 budget draft on Wednesday night that includes wage and spending cuts and a public sector gap of 4.6 percent, down from 5.3 percent expected this year. [ID:nLDE68L15R]
Analysts said the fiscal retrenchment meant there was less need for tighter monetary policy and a boost for the crown.
Annual inflation was 1.9 percent in August, close to the bank's target of 2 percent, with a tolerance band of one percentage point either side of the target.
Elsewhere in the region, Polish minutes showed the policy council voted on a surprisingly large 50 basis point rate hike in August, but the motion had failed. Hungarian central bank is expected to keep the main rate on hold on Monday. [ID:nLDE68L28B] (Editing by Toby Chopra)