Czech central bank chief: key rate unlikely to rise above 1% this year

PRAGUE: The Czech National Bank is unlikely to raise its main interest rate above 1% this year, Governor Jiri Rusnok was quoted as saying on Thursday in an interview with news website Ekonomicky Magazin.

The central bank has kept the two-week repo rate at 0.25% since last May after it had slashed it by 200 basis points in the spring to prop up an economy hit by the initial wave of the COVID-19 pandemic.

The bank has said further easing was not needed but that it would move carefully in any policy tightening. Markets have priced in chances of a rate hike later in 2021.

Asked by Ekonomicky Magazin when the main rate could return to 1%, Rusnok said the central bank would likely reach that rate before the European Central Bank but the pace would depend on inflation.

"I think that we will not surpass 1% on interest rates yet this year. However, it is a pure speculation, and besides inflation, it will also depend on the overall path of the economy and the exchange rate, of course," Rusnok said.

The central bank expects inflation to hover slightly above its 2% target this year. In December, the consumer price index (CPI) stood at 2.3%.

As for the economy, the central bank sees it recovering to growth of 1.7% this year after contracting an expected 7.2% last year.

Rusnok said earlier this week that he expected a double-dip recession.

The central bank will present a quarterly update to its macroeconomic outlook on Feb. 4.

The crown has been stronger than the central bank expected, but Rusnok reiterated in the interview that there was no need to intervene in the currency market.

"Our situation is not that critical for us to have to use this tool, and I believe it won't come to that," he said.