Czech crown may firm if inflation low - c.banker

...member Pavel Rezabek said on Wednesday.

He told a seminar on euro adoption that faster growth in the Czech economy, running at 6 percent annually for the third consecutive year, than in the euro zone economy could translate into more currency appreciation if domestic inflation stays low.

"Generally speaking, if our economy grows at a faster rate than the euro zone and inflation is not much higher versus euro zone levels, ... then the crown should appreciate," he said.

"On the other hand, if growth grinds to a halt, it would be difficult to imagine the crown to appreciate," he added.

The CNB has repeatedly pointed out that robust economic growth and the general trend of real convergence in prices and incomes towards higher levels in richer west European neighbours is likely to spur a long-term trend of nominal crown firming.

The CNB, using an inflation target as the key yardstick for setting interest rates, aims to keep annual consumer inflation at 3 percent, with a tolerance band of 1 percentage point either side of that level.

From 2010 onwards, it would aim for a lower, 2 percent target, keeping the plus/minus 1 percentage point comfort zone around the midpoint intact.

That regime change, announced early this year, would bring the CNB's target closer to the European Central Bank's price stability objective, defined as euro zone inflation close to but below 2 percent.

The crown traded around 27.560 per euro in morning trade on Wednesday , somewhat weaker from an all-time high of 27.385 seen in mid-September.

[PRAGUE/Reuters/Finance.cz]