The Czech central bank may use a weaker koruna to ease monetary conditions, boost exports and counter deflation risks, Governor Miroslav Singer said.
In the case of a “real” need, the “easiest” solution would be a currency intervention, Singer said in an interview published today in Hospodarske Noviny. Weakening the koruna would be a “logical” step in a country, where exports equal 80 percent of economic output, he said.
The Czech central bank cut interest rates to a record-low 0.25 percent on Sept. 27 amid an economic recession. Five central bank board members voted to reduce the benchmark two- week repurchase rate by a quarter-point. They also discussed which policy tools may be used to ease conditions more than would be accomplished by another rate reduction.
“If we had a feeling that there are long-term deflationary risks, the most obvious way of how to counter them is via currency weakening,” Singer told Hospodarske Noviny, adding he was “satisfied” with the last rate cut.
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