Czech c.banker says may need tight CPI goal - paper

PRAGUE, Nov 2 (Reuters) - The Czech central bank (CNB) may want to set a tighter inflation target and higher interest rates before joining the euro zone to create a buffer for meeting price stability requirements, a top CNB policymaker said.

CNB Vice-Governor Miroslav Singer told the weekly Ekonom in an interview published on Thursday that the CNB would lower its inflation target from the current 3 percent mid-point as soon as it runs the risk of breaking euro entry rules.

The CNB signalled last week it would likely cut the target once the country has set a new euro adoption road map after a joint decision by the CNB and the government to scrap the original 2010 target date and set no time frame for entry.

Policymakers have voiced concern the 3 percent mid-point might permit price growth to breach the test for euro adoption, which was 2.77 percent based on September consumer price data.

"It may happen that we would like to have a tighter inflation target, so that we target the inflation, which complies (with the criteria), with a reserve," Singer was quoted as saying in the interview.

"This would also mean higher interest rates, although this should not be a problem. Rates have been rising all over the world.

"It may happen that our growth will be slower. That is, however, the price we will pay for the euro," added the vice-governor.

The CNB's goal has been to keep inflation in a tolerance band of plus or minus one percentage point from a 3 percent target mid-point.

CNB Governor Zdenek Tuma said last week the mid-point could be lowered to 2.5 percent or even 2.0 percent to meet euro zone entry rules, which require inflation to be at most 1.5 percent above the three best performing EU members.

But Singer's comments suggested the mid-point might need to fall as low as 2.0 percent, rather than 2.5 percent, to ensure that price growth is slow enough to fit the criterion. ((Reporting by Marek Petrus; editing by Ruth Pitchford; Reuters Messaging: rm://marek.petrus.reuters.com@reuters.net; e-mail: prague.newsroom@reuters.com or marek.petrus@reuters.com; Tel: +420 224 190 477))

Keywords: ECONOMY CZECH CBANKER