Czech central bank's Benda expects rate stability -Hospodarske Noviny

PRAGUE, Oct 19 (Reuters) - The Czech central bank is likely to be able to maintain rate stability even as a second wave of the coronavirus pandemic slows the economic recovery, board member Vojtech Benda was quoted as saying.

Benda said in an interview with financial daily Hospodarske Noviny that a weakening crown exchange rate would hamper an inflation slowdown. At the same time, the central bank’s new outlook due in November would likely show a more gradual economic recovery.

“The result will likely be agreement on interest rate stability in the medium-term horizon,” Benda said in the interview published in Monday’s edition.

The seven-member central bank board cut its key two-week repo rate by 200 basis points to 0.25% in the spring but has held steady since May.

Inflation eased last month but was still above 3%, the upper end of the bank’s tolerance band around its 2% target.

Benda said the easing of the inflation rate was largely in food and fuel prices and evidence of lower growth in core inflation was yet to be seen.

He said the bank was in a comfortable situation and did not need to rush to resort to any unconventional policy tools to fight a deflationary trap.

Reporting by Jason Hovet. Editing by Jane Merriman