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Europe, Forex

Czech central banker Holub says reasons for holding or raising rates “very equal” -paper

(Adds quotes from full interview)

PRAGUE, Jan 20 (Reuters) – Czech central banker Tomas Holub sees reasons for rate stability or a moderate rise as “very equal”, considering domestic inflationary pressures, a fragile revival abroad and the strengthening crown, he was quoted as saying on Monday.

Holub voted in the minority for a rate hike at the last two meetings of the Czech National Bank (CNB) board, which in both cases decided 5-2 to keep the main two-week repo rate at 2.00%.

“In my view, reasons for stability and a moderate rise of interest rates has been very balanced recently,” Holub said in an interview with the business daily Hospodarske Noviny.

“Personally, I see two comparable scenarios. The first one is stability of rates during this year. But if we hike rates eventually, then I would see stability afterwards, rather than some cut in the autumn,” he said.

Headline inflation accelerated to 3.2% in December from 3.1% in November, putting price growth further outside the bank’s one-percentage-point tolerance band around a 2% target. That fuelled expectations of another rate hike in 2020 and pushed the crown to a seven-year high.

Holub said that although the crown’s strengthening was not anything dramatic, it was an anti-inflationary factor.

“The debate is now whether the slowdown abroad is sufficient by itself to return our inflation to 2%, or it is right to contribute to that, symbolically, by another hike,” he said.

Some of Holub’s colleagues, like Governor Jiri Rusnok, indicated that they would prefer a smooth rate path, meaning they would rather keep rates stable to avoid hiking now and having to cut rates later.

Holub said that monetary policy should be flexible.

“I have no problem with us raising rates at the beginning of the year and then cut them back in autumn, should the revival abroad not materialise,” he said. (Reporting by Robert Muller; Editing by Nick Macfie)


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