(Adds crown jump, quotes)
PRAGUE, Jan 13 (Reuters) - Czech central bank chief Miroslav Singer said on Tuesday there was no need to react quickly to deflationary pressures, causing the crown to rally after it had slumped in recent days on speculation about fresh interventions to weaken the currency.
The crown firmed 1.1 percent after the comments, to 28.091 per euro, well off a six-year low of 28.520 hit on Monday.
Crown weakness has been the central bank’s (CNB) key policy since November 2013 and recent speculation has suggested the bank might seek to weaken the currency further to counter deflationary pressures from the euro zone and cheap oil.
But the bank’s governor said a blog post on Tuesday that he saw no need to react immediately to oil and food price changes.
“In summary, at this moment it is not in my opinion necessary for the CNB’s monetary policy to react quickly to deflation impulses in the area of food or oil prices,” Singer wrote on the central bank’s website.
He said cheaper oil and food had started to feed into price indices faster than the bank had expected but that a large part of their impact was likely to fade over the timeframe — typically 12-18 months — used by the central bank when deciding policy.
Singer also noted that central banks were giving less weight to factors that affect inflation in the short run but do not reflect changes in demand in the economy, such as the recent sharp fall in oil prices and a strong harvest last year.
Lower oil prices were also good news for the economy, he said, and pointed out that core inflation has been in positive territory for a year.
He added that possible European Central Bank policy easing might ease deflationary pressures from the euro zone.
Repeating the statement made by the central bank following its December policy meeting, Singer wrote: “Only if there were to be a long-term increase in deflation pressures capable of causing a slump in domestic demand, renewed risks of deflation in the Czech economy and a systematic decrease in inflation expectations, would it be necessary to consider moving the exchange rate commitment to a weaker level.”
The bank weakened the crown by more than 5 percent in November 2013 and has pledged to keep it on the weak side of 27 to the euro at least until 2016.
A near-zero inflation reading in December and weak November retail sales figures had sparked speculation the bank might shift the floor, possibly to 29-30 per euro. (Reporting by Jason Hovet and Jan Lopatka; Editing by Catherine Evans)