PRAGUE, June 2 (Reuters) - Following are Czech central bank
Vice Governor Miroslav Singer's remarks from a Reuters interview
on Wednesday:
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SAFETY NET, EURO ZONE SITUATION:
"The fiscal response seems to be stricter than forecasted,
monetary loosening was also sort of deeper than expected, so the
result is balanced."
RATE CUT DECISION, OUTLOOK
"We were discussing that we might be sending a signal to the
markets, and the question was, are we going with a cut to
provide the market assurance that we think that, for the Czech
Republic, things are pretty much as usual no matter what happens
in, quite frankly, not that significant a southern economy, with
all respect to its beauty (Greece)."
"That was essentially the argument for a cut."
"Everything pointed to a cut, and the cut, regardless of
short-term events, was long overdue, since in case we would have
had rates a notch lower, nobody would bother proposing a hike.
That was probably quite clear."
"Or, the counterargument was that we could push the crown to
much weaker territory because of increased risk aversion and
because people do not read Czech fiscal data and debt data. In
the end we sort of decided to play it as normal, and the crown
development sort of justified the opinion that there was no need
to worry about Greece in our decision-making."
Asked: do you think it's more difficult to cut now?
"For the board, it's more difficult to cut. I still feel
this. We have a historically unprecedented low rate. In my
opinion we should react in a sense normally, but such a decision
would be more difficult to achieve in our board."
LIMITED ROOM
Singer said that the CNB policy rates could be so far
compared to an object falling in a glass filled with water and
jelly. The rate of decline of the object would slow at the
bottom of glass as the object would reach the jelly.
"It's very difficult to achieve the bottom when it's jelly,
and we are more in the jelly."
"It's not related that much to what is happening. It's more
reflecting that going to zero is difficult, as other central
banks have shown, now that it's in the jelly."
"For me it's probably not that much jelly as for other board
members. But for the purpose of forecasting of next step of the
board, we are in the jelly."
"We actually have pretty reasonable recovery data. Asia
doesn't seem to be doing that bad, eastern Europe seems to be
bottoming out of crisis, or is braking the fall, in a sense.
Even some Western economies are showing signs of recovery."
"Maybe... we will simply stay here for a while and then
start moving up, it's perfectly imaginable."
ON STRING OF EVENTS SINCE LAST RATE MEETING
"There has not been an event that would force me to think
that something should be changed. Things are moving pretty much
in a way that we expected."
"For this board it's more and more difficult (to cut)."
ON MARKET RATES IN EUROZONE
"For me the crucial thing is to be aware that official euro
rates are not driving several market rates. A lot of market
rates are below euro rates."
"But I am more concerned about the general demand effects
than trade on forex market or derivate market."
"The general rates situation makes the short CZK long EUR
(trade) or any similar scenario much less attractive than what
one would think just observing our rate and the ECB rate."
"Still we do care about the demand situation in the euro
zone as a major exporter."
WHAT COULD AFFECT POLICY?
"One can now imagine something coming out of the euro zone,
but I would say if something like this happens, it would
probably be the element of summer or fall or next year."
Then we will have to decide. But I don't think anything
strong is going to happen this week or the week after the next."
"The first growth impulse is supposed to come from exports
and related things such as export output, lowering unemployment,
higher demand, and etc."
"That probably means that if the euro zone goes down, or the
crown goes up, these things would put this scenario at risk and
have consequences."
"Nothing like this is now on the radar. It might change in
the future."
ON RISK OF FISCAL OVERTIGHTENING:
"Fiscal over-consolidation risk has a tendency to correct
itself. That would not be true for big global economies but this
is what happens here."
"This self correction of macro policies small open economy
is what happened in 2000-2001."
"What is really desirable is to return to conservative
(fiscal) policies."
IMPACT OF ELECTION
"It hardly changes the monetary policy outlook, it does not
change it dramatically. It can change it in a subtle way that is
barely identifiable in one monetary decision."
"The coalition may find a common programme in something that
will not be that radical."
"We always had coalitions across centre
