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Economic Uncertainty Clouds Czech Rate Outlook, Zamrazilova Says

The Czech economy is facing high uncertainty that is clouding the outlook for interest rates, central bank board member Eva Zamrazilova said.

Interest rates should rise this year in the absence of “a correction” in food-price growth and if there is a risk of inflation exceeding forecasts, Zamrazilova, who had voted for higher interest rates for a year, said in an interview with magazine Euro posted on the central bank’s website today.

Policy makers in Prague have expressed differing views on inflation risks as they debate when to start raising interest rates from a record low. Zamrazilova was one of the two board members who demanded a quarter-point increase in the two-week repurchase rate from 0.75 percent on Aug. 4. The other five policy makers voted to keep stable borrowing costs.

“I have long held the view that extremely low interest rates are a short-term solution for an economy during the time of crisis,” Zamrazilova was quoted as saying in the interview. “The fact is that we are facing such high uncertainty at present that I can’t say how I will see the situation at the next monetary policy meeting” scheduled for Sept. 22.

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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