PRAGUE: Czech central bankers cautioned on Tuesday against a rush to raise interest rates before the impact of ongoing coronavirus lockdowns becomes clearer.
The Czech Republic has been among countries hit hardest by the crisis, with a spike in COVID-19 infections and deaths this year.
Lockdown measures have been at their highest settings almost continuously since October and the central bank has warned of protracted lockdowns leading to looser policy for longer.
Markets, though, are betting that with the economy remaining resilient and inflation still above target, the Czech central bank could become the first in the European Union to begin lifting interest rates as soon as September.
Speaking before a March 24 policy meeting, three of the bank's seven board members said they would be cautious in weighing when the bank could begin raising its key policy rate from 0.25%, where it has sat since last May after a series of cuts last spring totalling 200 basis points.
"I still perceive greater risk that we start a premature tightening of monetary policy," board member Tomas Holub told daily Hospodarske Noviny in an interview released on Tuesday.
"For me, that is a greater risk than if we 'sleep in' a little versus what may perhaps seem as optimal looking back a year later."
He said rate-tightening starting in the second half was possible, but that it was unrealistic to expect three or four hikes as assumed by the bank's latest quarterly forecast.
While restrictions have hammered restaurants and retail businesses, industry has kept running. The central bank has forecast a 2.2% recovery in 2021 after a record 5.6% contraction last year.
Ales Michl, another board member, told Bloomberg bets on a summer hike may be premature.
"I'm a bit afraid we could hike prematurely, like the European Central Bank did in 2011," he said.
"I can't imagine voting for a hike in May, and it's impossible for me to predict now whether I will be ready to start normalizing this summer or later."
Their comments echoed Vice-Governor Tomas Nidetzky, who told Reuters on Monday the bank was in no rush but could look at a move in rates in the second half.