Czech central bank interventions will continue if necessary, governor says

© Reuters. FILE PHOTO: Central Bank Governor Jiri Rusnok attends a news conference in Prague, Czech Republic April 6, 2017. REUTERS/David W Cerny

PRAGUE (Reuters) -Czech National Bank interventions to stem crown losses will continue if necessary, Governor Jiri Rusnok told Czech Television on Friday, as policymakers fight against excessive depreciation pressures after Russia’s invasion of Ukraine.

The central bank announced on Friday it was active in the foreign exchange market and conducting operations against excessive fluctuations and crown depreciation, joining its Polish counterpart as central Europe currencies get hit by investors’ flight to safer assets.

The currency weakening comes as inflation still surges, making it difficult for central bankers, and Rusnok said on Friday it was too early to say how the situation would impact the Czech bank’s monetary policy tightening.

“Given that today we are in a situation that we have inflation at 10% even before the outbreak of this crisis, of course we have taken this into account,” Rusnok said on a Czech Television economic show.

“So there are the interventions that we started and will of course continue if necessary.”

The crown bounced on Friday following the bank’s announcement after having hit a 10-month low near 26 to the euro on Friday, and traded up 0.5% at 25.676 by Friday evening.

Rusnok said the interventions did not target any level.

The Czech bank has already lifted interest rates to a 20-year high of 4.5%, with 425 basis points of hikes since last June as it tries to tamp down soaring inflation.

Markets have expected another rise but more moderate than the previous sharp hikes at recent meetings.

Rusnok, when asked on further tightening, said there would be growing pressure on inflation given steep rises in some commodity prices, while also that growth would “very likely” not be as high as expected.

“It is simply a stagflation-type of shock,” he said.

“I can’t say how much it will touch raising rates. I can imagine anything, even no rise but also even some more visible rise… It is still too early (to say).”