(Repeats story published late on Thursday)
PRAGUE, Nov 5 (Reuters) - The Czech central bank kept
interest rates unchanged on Thursday, in line with analysts'
forecasts, after a weaker crown eased deflationary pressures and
data pointed to a moderate economic recovery.
The decision kept the main two week repo rate <CZCBIR=ECI>
<CZRP=>, used to sterilize excess liquidity at record low of
1.25 percent, quarter a percentage point above the European
Central Bank.
Markets had partially priced in a rate cut for Thursday
following the last meeting in September and after central bank
Governor Zdenek Tuma spoke in favor of cutting interest rates.
The crown firmed 0.8 percent against the euro <EURCZK=>
after the decision, while rates markets edged 10-15 basis points
higher.
The following are comments from Tuma at the press conference
following the bank's meeting on Thursday.
ON RATES
"Rate cut defenders... saw the economy continuing to be
under pressure, and that bringing inflation to target on the
monetary policy horizon requires cutting rates.
"Against that, there was an uncertainty over what the
long-term balanced trajectories are. If it turned out that for
example we would reassess growth in potential output downwards,
then the trajectory in interest rates could be different, it
would be higher. That is the one (reason) for (stable rates).
"The forecast is based on... a certain growth in potential
output. As you know the debate today both in the world and
domestically is about how the economy will preserve similar
characteristics after the crisis that it had before crisis.
"For example, growth in potential output belongs among
significant characteristics. As an illustration I can say, if
potential output growth was lower, then it has some implications
for setting interest rates and then the trajectory in interest
rates could be higher."
ON EASING TOOLS OTHER THAN RATES
"Logically it could be expected that if we talked about it
last time, then it would be debated also today. Nevertheless I
did not say that we would do it.
"I said the last debate was bout the effectiveness of
monetary policy. The question if and possibly when we should
employ other tools is still on the table. Nevertheless we have
not come to the opinion that we would be in the situation that
we would want or should use the unconventional tools."
ON ECONOMY
"We believe we are behind hitting the bottom and that the
economy is beginning to rebound, which we believe will become
obvious in the second half of the year.
"In 2010 we expect a moderate growth in GDP, but... we
expect that the path will be rather bumpy, that after some pick
up there will be some slowdown. Although growth has rebounded,
uncertainties surrounding future development are significant."
ON CROWN
"We expect the exchange rate roughly stable."
(Reporting by Jana Mlcochova and Robert Mueller)
