By Leos Rousek (Dow Jones 7. 10. 2011)
Published on the Wall Street Journal webside
The Czech central bank, or CNB, should refrain from further easing its record-low base interest rate of 0.75% despite prevailing signs of weakening economic growth, Eva Zamrazilova, one of seven CNB policy makers, said Friday.
"In the long term I'm not in favor of low interest rates," said Ms. Zamrazilova, who until last month voted in favor of rate increases.
"For now, my view is to wait and see," Ms. Zamrazilova added, but she made clear that she "definitely" opposes further rate cuts.
"I don't share the conventional wisdom of using low interest rates to promote growth," she said.
Abolishing non-tarriff trade barriers, including various bureaucratic hurdles or quotas on particular imports, in both the European Union and the U.S. is a way to kick-start the slackening global economic growth, she said.
Even though overall inflationary pressures remain tame, Ms. Zamrazilova is concerned that commodity and food product prices may stoke inflation in the future.
"In my opinion prices of agriculture commodities and foodstuffs will remain high in the future," she said, adding that despite their volatility the trend for commodity prices "will be upward."
Moreover, the expected sales tax increases in 2012 and 2013 by the Czech government may further fuel domestic expectations of where inflation is heading, she said.
Ms. Zamrazilova said she has no firm view at the moment how long the current lax monetary policy will stay in place. The Czech central bank is scheduled to hold two more rate-setting meetings in 2011.
Since September 2010 Ms. Zamrazilova has repeatedly voted to tighten monetary policy, and was joined several times by her board colleague Kamil Janacek. The two lone hawks on the board both turned dovish last month, voting to leave the base rate unchanged.
Her cautious attitude is also a result of last month's revisions of 2010 growth in gross domestic product showing the economy expanding 2.7% on the year, faster than the earlier estimate of 2.3% annual growth.
"Revisions showed that the increase of our interest rates would have been appropriate," Ms. Zamrazilova said. "I think that if we had done one or two hikes, this possibly would have given us more room now, more flexibility."