* Fund says hike unjustified, rate cuts may be needed
* Expects economic slowdown, falling inflation
* Polish government also criticised hike
* IMF's Lagarde had said ECB also has room for cut (Adds quotes, background)
WARSAW, May 16 (Reuters) - The International Monetary Fund added its voice to criticism of an interest rate hike in Poland, saying the move looked unjustified given an expected economic slowdown, easing price pressures and uncertainty stemming from the euro debt crisis.
Poland last week became the first European Union country to hike this year when it raised its key rate by 25 basis points to 4.75 percent, looking to fight inflation of around 4 percent - well above the central bank's target level of 2.5 percent.
The country's zloty currency has also fallen sharply against the euro.
But the IMF said on Wednesday that the outlook for the EU's largest eastern economy was dominated by risks, and a sharp dip in economic growth would even require interest rates to be cut.
"Given the economic slowdown, the projected drop in inflation and muted wage pressures, hikes in interest rates do not appear warranted," the fund said in a statement concluding its annual visit to Poland.
It said inflation should return to the 2.5 percent target in mid-2013.
Poland's economy - the only one in the EU to skirt recession during the crisis - expanded 4.3 percent last year and is seen slowing down to about 3 percent growth this year before accelerating again in 2013.
The central bank surprised many in the market with the hike, which had already drawn a sharp rebuke from Poland's deputy Prime Minister, who accused ratesetters last week of stabbing the economy in the back.
"The rate hike is surely controversial given the IMF has (also) taken a stance," said BGK chief economist, Tomasz Kaczor.
INFLATION? WHAT INFLATION?
The Polish hike contrasted with policy actions during the crisis by central banks in more developed countries, which have focused on stimulus measures to help nurse their economies back to health and tended to sidestep any inflationary pressures.
As the crisis in the euro zone has deepened, the IMF has also showed signs of shifting towards a more pro-growth agenda.
"Monetary policy should remain accommodative to support the weakening economy," the IMF said in the statement concluding its annual mission to Poland.
The fund's head Christine Lagarde said last week indebted states should bring their budgets under control at a "prudent" pace, and on Tuesday she told French television that the European Central Bank had room to cut rates.
In a Reuters poll this week, 15 of 72 economists agreed, saying they expected the ECB to cut, with most of those anticipating lower borrowing costs in the euro zone this year.
As in Poland, inflation in the single currency bloc is running above target, at around 2.6 percent compared with the ECB's goal of close to but just below 2 percent.
Despite the Polish rate hike, the zloty has fallen more than 3.5 percent versus the euro since last Wednesday, dragged down by rising speculation that Greece could leave the euro zone.
"Given that the zloty is a liquid and deep market, it is impacted by external sentiment," said Julie Kozack, the head of the IMF mission, adding that the weakening could hit the economy due to the stock of foreign-denominated mortgages.
The IMF said it expected Poland's economic growth to slow to 2.6 percent this year, and sees the fiscal deficit falling to 3.1 percent of GDP, slightly above the government's 2.9 percent target.
The IMF also said the high share of foreign capital in Poland's banking sector and large foreign bond holdings exposed it to risk of deleveraging if the euro crisis deepened.
The central bank declined to comment on the IMF's remarks. (Reporting by Marcin Goettig; Editing by John Stonestreet)
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