RPT-Czech cenbanker: Crown may temper rate hikes-paper

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A strong crown currency could cool Czech economic expansion and lessen the need for further near term interest rate hikes, central bank (CNB) policymaker Vladimir Tomsik said in a newspaper interview late Thursday.

Tomsik, in remarks due for publication on Friday, told the business daily Hospodarske Noviny that he and his six fellow policy board members were contemplating when and by how much to raise rates after they hit a five-year high with an August hike.

"We are clear about where interest rates should be heading in medium-term horizon. It is not a debate about whether to be raising them or not," he said, according to an advance copy of the interview. "It is a debate about when and by how much" to do so.

"It is ... a question how big the rise in our interest rates will be given the most recent events," he added.

Tomsik's tightening bias appeared to be shared by fellow policy-maker Mojmir Hampl who also said in remarks published on Thursday that the CNB was likely to keep raising rates to contain inflation fed by a consumer boom.

Hampl said a sharp, 4.7 percent rise in the crown against the euro since early July and the risk of global financial market turbulence sapping economic growth were not enough to soothe inflationary concerns. For details, see [ID:nL1167924]

Policymakers raised interest rates to 3.25 percent in August in the third such move this year, but the crown's rally and uncertainty fed by the global credit crunch led them to stand pat in September and signal a diminishing scope for more rate hikes.

The policy board is due to next review policy on Oct. 25 when its decision will be based on an updated quarterly inflation projection, which will take into account the firmer crown and lower foreign interest rates than earlier expected.

In the newspaper interview, Tomsik said the rise in the crown to Thursday's levels around 27.50 per euro , not far from a record high of 27.385 touched in mid-September, needed to be taken seriously.

"We will now be discussing how sharp the rise (in interest rates) will need to be given the most recent events," said Tomsik.

"As far as the exchange rate is concerned, it is truly having a restrictive impact at the moment and could make the economy ... to cool down," he was quoted as saying.

[PRAGUE/Reuters/Finance.cz]