Interview of the Deputy Governor Tomáš Nidetzký
By Jan Lopatka, Robert Müller (Reuters 30. 1. 2019)
The Czech central bank's vice-governor said chances were even that he would vote to raise interest rates again next week, as uncertainties in global politics and economic affairs offset domestic inflationary pressures.
Tomas Nidetzky, elevated to vice-governor last month, said the Czech economy's performance was strong, but outside effects had to be considered, given it was open and export-oriented.
At the Feb. 7 meeting, the board will discuss a quarterly update of its economic forecast, which serves as a guide to policymaking.
Nidetzky said uncertainties meant the forecast, which board members gete six days ahead of the meeting, alone would unlikely to form his final opinion.
"I will most likely go into this board meeting having it 50-50 (for a hike) and I will see, I will personally decide depending on the debate and my colleagues' arguments," he said.
The bank raised rates to 1.75 percent in five steps last year. The tightest-ever labour market has been pushing wages up - by 8.5 percent in nominal terms in the third quarter - helping domestic consumption and investment.
The bank took a break in December, with Nidetzky voting with the majority. A further rate increase was expected for February, but a weaker European economy, U.S.-China trade wars and the risk of a hard Brexit are raising doubts.
Economy fine
Nidetzky said he believed the domestic economy would grow around 3 percent this year and wages rise around 7 percent.
"(The economy) is working fine. I don't want to say robust, but there is still solid growth supported by domestic consumption. There are solid investments, both government and private," he said.
That could warrant about two further rate increases this year, but any action will depend on whether the foreign risks materialise, he said.
The external environment also worked as a balancing factor for the crown, he said. The currency has been weaker than the bank forecast and justified some of the past rate increases.
"I think that the scheme - if the crown was weaker than we saw in our outlook, and the economy developed in certain way, then you could forecast the hikes very well ... will not work entirely like this in the future," he said.
Nidetzky said he saw cautious language from the European Central Bank suggesting no tightening there this year.
"For us it is important why they are talking in this way - there is uncertainty about the development in the euro zone and Germany, and we should perceive that with sensitivity."
Governor Jiri Rusnok said earlier this month that the number of this year's hikes was open. Board member Vojtech Benda said there could be two or three in 2019, depending on both domestic and outside developments, and board member Tomas Holub said the period of no changes may be extended next week.