(Adds comments on exit, interest rates; difference with
By Tatiana Jancarikova
BRATISLAVA, Sept 8 Czech inflation should at
least hit the central bank's 2 percent target before the bank
drops its exchange rate cap that keeps the crown on the weak
side of 27 per euro, the bank's Vice-Governor Mojmir Hampl said
His comments, made to Reuters on the sidelines of a
conference in Bratislava, suggested the debate on the bank's
board as to when the cap should be lifted is far from over.
Governor Jiri Rusnok said on Wednesday he could imagine
dropping it even if inflation is still slightly below target.
With interest rates near zero, the bank has kept the crown
weak since 2013 to help stave off deflation, building up foreign
currency reserves through market interventions.
The board has said it expects to let the crown float from
mid-2017, stoking speculation on currency markets as to the
exact timing of the move, and whether the floor will be lifted
in one go or progressively.
Hampl's comments supported a relatively cautious stance.
"I am a bit more of a conservative ...central banker," he
said. "I would really like to see inflation that is at least on
target so we can quit the (weak crown) regime without causing
any further instability or problems."
The timing of the exit will also depend on whether the
European Central Bank eases policy further, with some analysts
arguing an extension of the ECB's asset purchases beyond next
March would force the Czech bank to keep the crown weak for
Hampl shared Rusnok and board member Vojtech Benda's
preference for a one-off exit from the cap rather than a
Asked about the subsequent pace of rate hikes following the
end of the peg, Hampl said this was not an immediate concern.
"First of all we have to time the moment of exit...The question
of raising interest rates is secondary."
"(But) it is clear that we can leave the exchange rate
commitment only when we can imagine that monetary conditions
will be tighter."
(Reporting by Tatiana Jancarikova; Writing by Jan Lopatka;
editing by John Stonestreet)