Jan Lopatka, (Feb 26 2008, Reuters)
Czech central bank board member Pavel Rezabek stuck to his preference for keeping rates unchanged in the near future on Tuesday but warned that a tightening may be needed if demand pressures rise.
Rezabek was one of the two on the central bank's seven-member board who voted against a quarter-point interest rate hike on Feb. 7, and has generally been seen as an interest rate dove.
"I would rather prefer stability for some time because there were several interest rate hikes last year and also one at the February meeting this year," Rezabek told reporters.
"But on the other hand... the pressure of demand is one of the most important (factors) and if that should happen, we should react very fast," he said.
The bank's latest quarterly inflation forecast prepared by the bank's staff ahead of the Feb. 7 meeting predicted market interest rates would rise in the short-term but fall in late 2008, as inflation pressures abated.
Rezabek added that he saw it as unlikely that there would be interest rate cuts as pronounced as the forecast predicted.
The market was surprised by the dovish outlook for rates in late 2008 and 2009, but some analysts still expect the bank may deliver one more hike this year, especially after a higher-than-expected January inflation jump.
Czech rates, at 3.75 percent, are still 25 basis points below the euro zone despite 200 basis point tightening since 2005.
Rezabek added he also expected a correction of the crown currency gains. The crown has gained six percent so far this year against the euro <EURCZK=> to hit all-time high of 24.93 on Monday. It stood at 25.027 at 1130 GMT on Tuesday.