* Cbank cuts rates by 50 bps to 7 percent, as fcast
* Says IMF-agreed steps essential for inflation, economy
* Analysts see more rate cuts towards 6 pct at end-2010
* CPI risks, Greece's fiscal woes pose risk to more easing
(Adds c.bank comment, details)
By Marius Zaharia and Luiza Ilie
BUCHAREST, Feb 3 (Reuters) - Romania's central bank cut its benchmark rate by 50 basis points to 7 percent, as expected, to aid the recession-hit economy, but warned that enforcing tough measures agreed with the IMF was essential for recovery.
The move comes after a surprise half point cut in January following the creation of a shaky centre-right majority cabinet that ended a long political crisis and helped unfreeze a 20 billion euro International Monetary Fund-led aid deal.
With the deal back on track, Romania must now streamline its bloated public administration, sacking as many as 100,000 state workers this year, and enforce painful wage and pension freezes.
The measures are expected to spark nationwide strikes from state workers later this month, and pensioners on Wednesday threatened to sue the cabinet over planned freezes, but the central bank said the fiscal tightening was crucial.
"Firm implementation of the economic policy mix ... agreed under the external financing arrangement is essential for achieving sustainable disinflation, maintaining financial stability and restarting lasting economic recovery," it said.
The bank also said monetary policy remained prudent, and noted the European Union member's external shortfall, once its main vulnerability, was at sustainable levels.
The leu
FURTHER EASING
Most economists polled by Reuters last week expected a half-point cut in interest rates
"The rate decisions in the first two months of the year suggest to us that the bank is content with the recent developments on the political front and the progress made on the IMF program," Citi said in a note.
"We also believe that the bank is likely to carry out its policy easing in a frontloaded manner to take advantage of the recent positive developments." It said it sees rates at 6.25 percent at the end of the year. Romania's rates, which have gone down 325 basis points over the past 12 months, remain the highest in the European Union, compared with Hungary's 6 percent, Poland's 3.5 percent and the Czech Republic's 1 percent.
Economists say there is little chance the bank will cut rates below 6 percent this year, due to persistent inflationary risks from administrative prices and fuel costs.
The central bank also said uncertainty in the global economy and capital flow trends weighed on the inflation outlook.
Also, potential contagion throughout the region from a possible worsening of Greece's fiscal problems, which rattled markets last month, could hurt sentiment and prompt the central bank to halt the easing cycle, analysts said.
"Rates are at a relative low level taking the overall risk for the economy into account and the risk of spill-over from the Greek situation could also trigger pressure on the leu," said Lars Christensen of Danske Bank in Copenhagen.
The central bank also said it has scheduled a news conference to present its quarterly inflation report on Feb. 5. (Editing by Andy Bruce)