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Czech Policy Makers Named as Rate Debate Heightens

Czech President Vaclav Klaus named economist Lubomir Lizal as a new member of the central bank’s rate-setting board as policy makers heighten their debate on when to start raising borrowing costs.

Lizal, an associate professor at the Center for Economic Research and Graduate Education, Charles University, or CERGE UK, will replace Robert Holman, whose term expires Feb. 13. Klaus, who has the sole power to name policy makers, also reappointed Pavel Rezabek for a second and final six-year term on the board at a ceremony at the Prague Castle today.

Lizal, 41, joins the board as debate on when to start raising interest rates from a record low intensifies. The Ceska Narodni Banka left the two-week repurchase rate at 0.75 percent on Feb. 3 after three of the seven board members voted for a quarter-point increase. The bank is weighing a recovery from a recession in two decades and accelerating inflation.

“From the historical point of view, the central bank has conducted good policy, which is visible in the fact that the Czech economy is doing relatively well,” Lizal told reporters after the ceremony. He refused to comment on current monetary-policy settings.

The bank has kept rates stable since May after cutting them by 3 percentage points in less than two years as the global crisis pushed the country into the worst recession since the end of communism in 1989. Gross domestic product rose 2.8 percent in the three months through September, the most in nine quarters.

Transition Economics

The inflation rate advanced to 2.3 percent in December, the highest since March 2009 and exceeded the central bank’s target of 2 percent, driven by higher costs of food and gas.

Lizal, a member of the government’s advisory council, specialized in transition economics, applied microeconomics, econometrics, industrial organization and international trade during his doctoral studies in economics, according to his biography posted on the CERGE’s website.

He wrote or co-wrote research papers analyzing the relation of environmental issues and corporate performance. In 2001, Lizal helped write a paper with central bank Governor Miroslav Singer and the chairman of CERGE’s Executive Committee, Jan Svejnar, on enterprise breakups and performance during the transition from planned to market economy.

‘Academic Economist’

Lizal “is well known locally as an academic economist,” said David Marek, chief economist at Patria Finance, a Prague-based unit of KBC Securities Group. “Unfortunately, we know nothing about his attitude to the current monetary policy settings and thus we aren’t able to judge whether he will join a camp of doves or hawks.”

Rezabek, who has spoken against a rush to adopt the euro, said on Dec. 1 the benchmark rate was “extremely” low, while voting to keep borrowing costs stable on Dec. 22. The bank on Feb. 11 will publish the individual votes of the board members from the Feb. 3 policy meeting. The next monetary-policy meeting is scheduled for March 24.

Lizal’s replacement of Holman, who had expected interest rates to start rising earlier than the end of the year assumed in the central bank’s forecast, “makes the voting at the next monetary-policy meeting even more uncertain,” Nordea Bank AB analysts led by chief currency strategist Elisabeth Andreew, wrote in a research note today.

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