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Czech central banker Holub says likely to back 75 basis point hike in June

05/29/2022 | 08:26am EDT

PRAGUE, May 29 (Reuters) - Czech central banker Tomas Holub said on Sunday he was likely to support a further interest rate hike in June of about 75 basis points.

The increase would bring the key two-week repo rate to 6.5% after the bank delivered 550 basis points worth of rates hikes over the past year as it fights inflation, which rose to 14.2% in April.

The next monetary policy meeting is due on June 22.

"I assume that in June, I will support another raise of interest rates, roughly the size expected by the financial market (about 75 basis points)," Holub said in a live debate on Czech Television.

Holub has said previously that he would probably vote for another hike in June but he did not specify the size.

"That is a realistic market prediction, which takes into account that the market knows our macroeconomic forecasts, where our outlook would see the level of interest rates which would return inflation to low digits at sufficient speed," he said.

The bank's latest quarterly forecast, issued in May, foresaw rates peaking around 8% this quarter. But at its May 5 meeting the board took a step closer to an alternative scenario modelling a slower inflation drop and a lower rate path.

Since the May meeting, where the bank signaled that more hikes could come, Governor Jiri Rusnok and Vice-Governor Tomas Nidetzky have said that a rate hike was likely in June, while board member Vojtech Benda mentioned stable rates as a possibility.

Only two members on the seven-seat board, Oldrich Dedek and Ales Michl, have consistently voted for stable rates over the past year. Michl is due to take over as governor of the board in July.

President Milos Zeman has yet to decide on three nominations to the board, which could swing the majority view on the board towards Michl. (Reporting by Robert Muller, Editing by Michael Kahn and Hugh Lawson)


© Reuters 2022
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