Czech Central Bankers Don’t Favor Koruna Cap Shift, Singer Says

Czech central bank Governor Miroslav Singer doesn’t see the will within the rate-setting board to change the current limit for koruna gains, saying the monetary easing has contributed to an economic revival.

The regulator in Prague is measuring the impact of its decision to weaken the koruna with market interventions last November as it sought to fend off deflation threats. The bank says its policy, which includes a Swiss-style lid on koruna gains at “near” 27 per euro, helped stimulate consumer spending.

Changing the cap level “can’t be ruled out, but without much more dramatic changes in the economic situation, I consider that to be highly unlikely,” Singer said in an interview with Lidove Noviny published today. “There doesn’t seem to be the will to do that within the bank board.”

Czech policy makers now want to keep the cap on koruna gains in place until the first quarter of 2016 as a worsening outlook in the euro area weighs on Czech economic growth and inflation.

Singer reiterated that the bank won’t allow “sharp” koruna swings in either direction after the limit is removed, saying the monetary authority may intervene verbally or in the market to smooth out currency volatility.

One year after the intervention, Statistics Office data showed consumer confidence turning positive for the first time in more than seven years.

Consumer-price growth has accelerated this year, with the central bank crediting the currency ceiling for staving off deflation. The economy grew 0.3 percent in the third quarter from the previous three months, marking the sixth consecutive period of expansion.

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