PRAGUE, Oct 22 (Reuters) - The Czech central bank will exit from its weak crown policy once it sees its inflation target fulfilled in a sustainable manner, Governor Jiri Rusnok was quoted as saying on Saturday.
The central bank launched the interventions, preventing the crown from strengthening beyond the level of 27 crowns per euro, in 2013 to fend off risks of deflation and to help growth, after it cut rates to almost zero in the previous year.
At its last policy meeting on Sept. 29, the central bank’s board said it would not end this policy before the second quarter of 2017, and it reiterated that it saw mid-2017 as the likely time when the crown cap will be removed.
“We said we would do it once we will see the inflation target fulfilled in a sustainable manner,” Rusnok said in an interview published by Lidove Noviny daily.
“That means that we want to be at the two percent target, or even better, above it,” he said. “On the other hand, we never said that we would exit from the interventions the very same day when inflation reaches two percent.”
In September, the Czech consumer price index grew 0.5 percent year-on-year. The central bank forecasts inflation to accelerate to 2.2 percent in the third quarter of 2017.
Rusnok also reiterated the bank did not exclude using negative rates to smoothen the exit from interventions.
“We don’t rule them out as an assisting tool to complicate the situation for those who would want to speculate with the crown,” Rusnok said.
“They would be used on the incoming capital and it would be a short-term issue, which would help with the end of interventions. By no means it should affect ordinary savers.”
The governor also repeated that the ideal exit would be a one-off step.
Reporting by Robert Muller; Editing by Jeremy Gaunt