© Reuters. FILE PHOTO: Central Bank Governor Jiri Rusnok attends a news conference in Prague, Czech Republic April 6, 2017. REUTERS/David W Cerny
PRAGUE (Reuters) – The Czech National Bank looks likely to raise interest rates again at its June 22 meeting as developments in economy are still inflationary, Governor Jiri Rusnok was quoted as saying on Monday.
The Czech central bank has raised its main two-week repo rate by 550 basis points to 5.75% over the past year as it looked to tame soaring inflation driven by high energy prices, and also solid domestic demand, and to keep inflation expectations anchored.
“It all points to us having to go higher still (with rates). Our forecast expected higher rates than what we chose at the last policy meeting. And the development is, unfortunately, inflationary,” Rusnok told news website www.aktualne.cz.
Although he said that he did not want to anticipate anything, Rusnok said that another strong hike looked needed, namely to prop up the crown exchange rate which the bank counts on to deliver part of the tightening.
“So far, we know that the crown is weaker than what our scenario counted on. Hence, we cannot limit ourselves by any ceiling. So, (the hike) looks like three quarters of a percentage point or more,” Rusnok said in the interview.
Rusnok’s term expires at the end of June, and he is going to be replaced by current board member Ales Michl, who has been opposing the central bank’s tightening cycle.
President Milos Zeman has yet to pick three names to the seven-seat board by July, by which he might sway the majority at the board towards Michl’s stance.