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UPDATE 2-Poland holds rates despite poor growth outlook

* Market had been expecting rate cut to stimulate growth

* C.Bank says will cut if inflation eases, data worsens

* Polish economy, east Europe's biggest, is slowing sharply

* Analysts say central bank may be falling behind curve

(Updates with central bank statement, quotes)

By Karolina Slowikowska and Christian Lowe

WARSAW, Oct 3 (Reuters) - Poland kept interest rates unchanged on Wednesday, surprising analysts who had expected a cut and prompting concerns the central bank may have left it too late to counter a sharp economic slowdown.

The bank gave a strong signal that a sequence of rate cuts is on the way, possibly starting next month, but it opted to keep the key interest rate at 4.75 percent for now, despite a worsening outlook for growth.

"It's disappointing that the policymakers didn't do the right thing," said Lars Christensen, chief analyst at Danske Bank.

"It's a mistake to wait with the rate cut till the end of the year because the economy is slowing pretty dramatically... Poland is moving in the direction of a wrong policy mix."

In a Reuters polls of analysts late last month, 21 out of 27 had said they expected the central bank's 10-strong Monetary Policy Council would cut the rate by 25 basis points to 4.50 percent.

Poland had up to now managed to avoid the slump in the rest of the European Union, but the gloom elsewhere is finally catching up with it. Growth in eastern Europe's biggest economy slowed to 2.4 percent in the second quarter of this year from 3.5 percent in the first.

A sharp slowdown in Poland will tarnish one of the few bright spots still left on Europe's economic landscape, and would mean Polish firms placing fewer orders for goods and services with euro zone exporters, especially in neighbouring Germany.

Poland's government is banking on interest rate cuts to stimulate growth because it has few other mechanisms at its disposal. Increasing public spending is not an option because Poland has committed to driving down its debt.

The central bank said in a statement after a two-day session of its rate-setting council that it will cut rates under two conditions: if data, including the bank's projection for November inflation, points to a protracted slowdown, and if inflationary pressures are limited.

It did not say if the first cut would happen at the council's next sitting in November, or give firm guidance about the size of the cuts. The bank last lowered the key rate in June 2009.

"Any pre-commitment (to rate cuts in the bank's statement) ... is very weak," said Peter Attard Montalto, economist at Nomura.

GLOBAL STIMULUS

The bank's statement acknowledged that other economies were easing their monetary policy, a nod to fresh stimulus measures adopted by the Federal Reserve and the European Central Bank. Those measures have left Poland's monetary policy looking increasingly out of step.

Speaking at a news conference, central bank head Marek Belka indicated that rate cuts in Poland, if and when they come, would not be dramatic. He said he wanted to keep interest rates above inflation. In August inflation was running at 3.8 percent.

Analysts say the central bank may have decided against a rate cut now because it had lingering concerns about inflation and wanted to see economic data due in November.

Another factor may be the fear of losing face if it lowers interest rates now having raised them as recently as May.

The Polish economy is still healthy by European standards, but the slowdown is painful for a country that had two decades of uninterrupted growth and, uniquely among European Union states, stayed out of recession after the 2008 banking crisis.

Poland was able to counter the downturn through public investment in the form of EU development funds and infrastructure spending, but those sources of stimulus are tapering off.

Poland's zloty currency firmed 0.5 percent against the euro immediately after the central bank's decision.

(Additional reporting by Marcin Goettig and Dagmara Leszkowicz; Editing by John Stonestreet)

((christian.lowe@thomsonreuters.com))

Keywords: POLAND RATES/