PRAGUE: The Czech central bank would face a new dilemma on how to meet its inflation target if there is a strengthening of deflationary pressures from the euro zone and lower oil prices, Vice-Governor Vladimir Tomsik was quoted as saying on Wednesday.
Tomsik, writing in an opinion piece in daily Hospodarske Noviny, said that the euro zone had long-term falling producer prices importing strong deflationary pressures to the Czech economy, and this could strengthen if it pulls down fragile external demand growth.
He said in a such a situation, a drop in oil prices could have negative effects on inflation expectations, leading to a growth in real interest rates.
"This can have a negative effect on development of real domestic demand and the (central bank) will stand before an old-new decision on how to meet the inflation target, stabilise inflation expectations, and support the domestic real economy," Tomsik said.
Comments
Comments are closed.