By Leos Rousek (Dow Jones Newswires 8.7.2010)
The Czech National Bank Governor Thursday said he expects current interest rates to remain low for long but finds it hard to imagine reaching enough support on the central bank's monetary policy board for further rate reductions.
"I think it would be very difficult and the economy would have to send much stronger signals for this board to cut," Miroslav Singer told Dow Jones Newswires in his first interview after taking over the bank's reins July 1.
Singer, who previously served as the bank vice-governor since 2005, in May joined three other members of the seven-strong rate-setting board voting in favor of cutting the headline two-week repurchase agreement rate to a record low of 0.75%.
"I feel very comfortable with the current level of the rates," he said. "My gut feeling is that the current level of rates and low rates in general might stay here longer than people generally think.
Singer dismissed recent positive economic readings, including Wednesday's unexpectedly high 3.1% annual increase for Czech retail sales in May, as likely signals for the bank to begin raising interest rates again.
"We don't make strong opinions on one isolated release of data," he said.
However, the bank policy makers would find it hard to agree on any further easing of monetary policy, Singer added.
Singer was very dismissive of even considering any time frame for the Czech Republic's bid to adopt the euro, given current problems facing the euro-zone in the wake of the Greek fiscal crisis.
"I don't even have a clue how long it will take for the current euro-zone problems to be solved," Singer said, adding that even thinking about this now by Czech policy makers "can't bring any benefits."
Moving on to plans for boosting financial regulation across the European Union, Singer voiced his strong dislike for the proposed bank transaction fee as a means to harmonize and tame financial markets in the 27-member bloc.
"It's all driven by that some institutions can be closed and some not because some countries have too big institutions and too big financial sectors relative to their budgets," Singer said.
The EU shouldn't force a one-size-fits-all remedy on countries such as the Czech Republic with much smaller financial sectors relative to their gross domestic product, he said.
"If the U.K., France or other countries probably feel they should constrain the growth of their financial sectors relative to GDP, or stop it, or make it contract," then it is up to them, Singer said.
But the bank transaction fee is inappropriate for the Czech financial sector. "Our service sector has a big potential to grow, including the financial sector," Singer said.
Moreover, Singer said he finds the idea of taming financial sectors in developed countries as counterproductive too.
"If they want to contract their banking, their finance (sector) and they want to sustain their living standards, they must [produce] something else and this something else probably means something that we can buy," he said.
For video of this interview, go to: http://online.wsj.com/video/czech-central-banker-rates-to-stay-low-longer-tha/86B6BBAD-FA8F-464A-932A-BEDD8DE63647.html