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UPDATE 1-Czech central bank's Hampl: interest rate rises needed
October 25, 2017 / 7:49 AM / in a month

UPDATE 1-Czech central bank's Hampl: interest rate rises needed

(Adds quotes, details, crown)

PRAGUE, Oct 25 (Reuters) - Czech interest rates should head higher, central bank Vice-Governor Mojmir Hampl said on Wednesday, adding he would prefer standard hikes of 25 basis points each rather than a big jump.

Markets are mostly pricing in a 25 basis point rate hike when the bank meets again on Nov. 2.

With a growing economy and inflation above target, the Czechs delivered their first rate hike in almost a decade in August, lifting rates from near zero, and narrowly voted to hold fire again at the last meeting in September.

Some central bankers have raised the chance of increasing rates by a bigger amount in November.

Hampl, who voted in the minority for a rate hike in September, said he could not rule out a bigger increase but that he would prefer a standard rise.

“I can not imagine what would change my opinion that we should go higher with rates,” Hampl told reporters on the sideline of a conference.

“I would not rule out anything, but my personal preference is rather to go the path of standard steps, and the standard is... 25 basis points,” he added.

The central bank meets twice before the end of the year.

On Tuesday, board member Tomas Nidetzky told Reuters the central bank may consider a 50 basis-point hike when it next meets. Another board member, Vojtech Benda, has also said the economy would benefit from a 50-75 basis point increase before the end of this year.

Board member Marek Mora told Bloomberg on Tuesday the bank had room to raise rates by a quarter point next month.

Of the seven-member board, Hampl, Benda and Mora had voted for a rate hike in September.

The crown firmed to a four-year high against the euro on Tuesday following Nidetzky’s comments, breaking past 25.60 for the first time since the central bank abandoned in April an intervention regime that had kept the crown weak.

The crown though has been a slow gainer since being set free, showing a gradual rise due to an overhang of long-crown positions built by investors before the April float.

Hampl said on Wednesday that this “overboughtness” remained in the market. (Reporting by Robert Muller; Writing by Jason Hovet; Editing by Toby Chopra)

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