* Bank to resume policy tightening in Q2 or Q3
* Demand for Czech goods to resume to pre-crisis level
* This year to record small growth
* Growth seen around 3 percent from 2011 on
By Jana Mlcochova
PRAGUE, Jan 20 (Reuters) - The Czech central bank may begin monetary policy tightening in the second or the third quarter of the year and start with a quarter point hike, central bank board member Robert Holman said on Wednesday.
Czech interest rates are at a record low, with the main two-week repo rate at 1 percent, on par with the euro zone, after seven cuts totalling 275 basis points made over the last 17 months.
The bank will update its quarterly inflation forecast at a policy meeting on Feb. 4, and the new outlook will likely confirm the path for rate hikes, Holman said.
"A rate increase will probably be consistent with the forecast and I think that roughly in the second of the third quarter we will raise rates by a quarter of a percentage point," Holman told Reuters in an interview.
Holman was in a minority voting for stable rates at the last interest rate-setting session in December which voted to cut the main rate by 25 basis points.
He said he was hesitating until the last moment whether to vote for the cut or for stable rates but decided to stay put mainly because of expectation of resuming rate tightening in "two to three quarters".
"I thought the (December) rate lowering was a bit needless. I do not think it has had any effect on the economic situation here whatsoever... perhaps with the exception of the exchange rate."
Most economists said it was the last rate reduction in the present easing cycle and a period of stable rates lasting for several months was to follow before the bank starts tightening.
Governor Zdenek Tuma said earlier this week rates may have reached their lowest in the present easing cycle.
Holman is known for defending a policy of seldom making changes to interest rates which he considers detrimental to the corporate sector, as it complicates companies' financial planning.
DEMAND TO RECOVER FULLY
The Czech economy has probably gone through the worst with a short recession at the turn of 2008 and 2009. In its last macroeconomic forecast from November, the bank sees a W-shaped recovery, with the second, milder dip coming in the fourth quarter of this year.
Singer said on Wednesday growth could reach about 2 percent this year, above the bank's November forecast of 1.4 percent.
Holman said his view of an economic recovery has not changed markedly compared to the November forecast.
"We expect that a recession in western Europe has ended and that this will spill over here through increased foreign demand. We can expect a moderate recovery, on average it will be a bit above zero, moderate economic growth."
In the years immediately ahead, growth should be around half of the pre-crisis pace, about 3 percent, he said.
Holman said he expected foreign demand to resume to pre-crisis levels after the economic downturn subsides and the country's potential output should remain intact.
His remarks are contrast to November comments by Vice-Governor Mojmir Hampl who said there was a risk the economy could emerge from the crisis with a lower potential output, which could lead to a rise in demand-led price pressures and rates higher than the baseline interest rate trajectory assume. (Editing by Stephen Nisbet)