PRAGUE, Oct 14 (Reuters) - Disinflation pressures prevail in the Czech economy but a poor outlook for fiscal policy remains the main mid-term risk, central bank Vice-Governor Miroslav Singer said in a presentation to be delivered later on Wednesday.
Annual inflation was at zero in September and price pressures remain subdued in an economy which had contracted by a record 5.5 percent in the second quarter.
'Various price areas show the prevalence of disinflationary pressures,' Singer said in the presentation.
He later told a conference inflation would not be a threat for the next two years.
'I do not fear inflation over the next two years,' Singer said. Capacity utilisation fell by 25 percent globally and no inflation pressures threaten to appear until utilisation returns to the full, he said.
He reiterated risks to the bank's inflation outlook were on the downside and the bank was likely to debate a rate cut at the next meeting on Nov. 5. He said August retail sales released earlier on Monday did not change those views.
'We see in this moment the balance of risks going in an anti-inflationary direction, and nothing has changed about that,' Singer said.
Singer said fiscal policy was a major risk: 'Despite short-term measures, the fiscal policy represents the biggest mid-term risk to the macroeconomic development -- the expected fast growth in debt,' the presentation said.
Singer voted along with Governor Zdenek Tuma to cut interest rates last month, but they were outvoted by the rest of the board that preferred to keep the main repo rate flat at a record low of 1.25 percent. The Czechs have shaved 2-1/2 percentage points off of rates since August 2008.
(Reporting by Jana Mlcochova, writing by Jan Lopatka, editing by Mike Peacock) Keywords: CZECH CBANKER/ (prague.newsroom@thomsonreuters.com; Reuters Messaging: jan.lopatka.reuters.com@reuters.net; +420-224 190 474) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Annual inflation was at zero in September and price pressures remain subdued in an economy which had contracted by a record 5.5 percent in the second quarter.
'Various price areas show the prevalence of disinflationary pressures,' Singer said in the presentation.
He later told a conference inflation would not be a threat for the next two years.
'I do not fear inflation over the next two years,' Singer said. Capacity utilisation fell by 25 percent globally and no inflation pressures threaten to appear until utilisation returns to the full, he said.
He reiterated risks to the bank's inflation outlook were on the downside and the bank was likely to debate a rate cut at the next meeting on Nov. 5. He said August retail sales released earlier on Monday did not change those views.
'We see in this moment the balance of risks going in an anti-inflationary direction, and nothing has changed about that,' Singer said.
Singer said fiscal policy was a major risk: 'Despite short-term measures, the fiscal policy represents the biggest mid-term risk to the macroeconomic development -- the expected fast growth in debt,' the presentation said.
Singer voted along with Governor Zdenek Tuma to cut interest rates last month, but they were outvoted by the rest of the board that preferred to keep the main repo rate flat at a record low of 1.25 percent. The Czechs have shaved 2-1/2 percentage points off of rates since August 2008.
(Reporting by Jana Mlcochova, writing by Jan Lopatka, editing by Mike Peacock) Keywords: CZECH CBANKER/ (prague.newsroom@thomsonreuters.com; Reuters Messaging: jan.lopatka.reuters.com@reuters.net; +420-224 190 474) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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