Czech central bank board member Vladimir Tomsik voted in favor of a quarter-point reduction in the benchmark two-week repurchase rate, according to minutes released today from the Nov. 3 policy meeting.
The board voted 6-1 at the session to leave the main interest rate at a record-low 0.75 percent for a 12th meeting.
“The board agreed that the risks and uncertainties were currently extremely high and that the majority of them would come from abroad, owing mainly to the escalation of the debt crisis in the euro area,” the minutes said. “In this regard, doubts were repeatedly raised about the re-emergence of growth and inflation impulses abroad in 2013.”
The seven-member board discussed the depreciation of the euro against the dollar and the resulting effect on the Czech economy, which depends on exports to the euro area and takes in goods that are priced in dollars, the minutes showed.
“It was said repeatedly that to sustain the public finance deficit at the budgeted level, it would be necessary to make further spending cuts and tax changes,” according to the minutes. “Fiscal policy could therefore be expected to be procyclical.”
The central bank left its forecast for a public-sector deficit in 2011 at 3.8 percent of gross domestic product and expects the budget gap to widen to 3.4 percent next year, according to details from its quarterly inflation report, released today.
The public-sector deficit will reach 3.5 percent of GDP in 2013, it said. Growth in the second half of this year will decelerate on “fading” inventories, it added.