UPDATE 1-Czech c.banker cool towards idea of rate cut

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Czech central bank (CNB) board member Mojmir Hampl on Friday poured cold water on the idea floated by a fellow CNB policymaker that interest rates could be cut to offset the strength of the crown.

Hampl, who joined the seven-member CNB policy board last month, said in an online interview with readers of the daily Lidove Noviny that he did not see the crown's recent firming as dramatic enough to justify a rate cut.

CNB Vice-Governor Miroslav Singer's suggestion on Wednesday that interest rates could be cut surprised the market, running contrary to market expectations that a rise will be the next rate move [ID:nL10244378].

When asked whether the central bank (CNB) should cut rates in case the crown firms too fast, Hampl said on the Internet pages of the daily Lidove Noviny:

"This is probably a reaction to the statement by colleague Singer from this week, isn't it? I personally do not see it so dramatically so far."

The crown shrugged off comments by both Hampl and Singer and held a recent range, trading at 27.750 to the euro .

It rallied 6 percent versus the euro over the last year but has slid slightly more than 1 percent from an all-time high of 27.410 reached in late December and matched earlier this month.

Singer, a pragmatic and rather dovish policymaker, was quoted on Wednesday by the business daily Hospodarske Noviny as saying he would "seriously consider" cutting interest rates if the crown stayed firm.

Investors already took Singer's comments with a grain of salt, and Hampl's comments confirms their view that not all members of the seven-strong policy board would share his view and be ready to actually help him push through a rate cut.

The CNB raised its key rate 75 basis points between October 2005 and September 2006 to 2.5 percent, the lowest in the European Union and 1 percentage point below the euro zone equivalent.

Markets have fully discounted a quarter percentage point rate rise by mid-year, and see high chances of another such increase in the second half of 2007.

[PRAGUE/Reuters/Finance.cz]