(Repeats story published late on Wednesday)
* Singer says increasingly difficult for board to cut rates
* Says crown level is "absolutely fine"
* Sees little impact from election on markets, policy
By Jana Mlcochova and Michael Winfrey
PRAGUE, June 2 (Reuters) - No event since the last Czech
central bank policy meeting has provided a reason to change
interest rates and it is becoming more and more difficult for
the board to cut, a top central banker said on Wednesday.
The bank surprised markets on May 6 by cutting the main
two-week repo rate <CZCBIR=ECI> used to drain excess liquidity
to a record low 0.75 percent, relaxing borrowing needs by a
cumulative 3 percentage points since August 2008.
Since then a number of factors have cast doubt on the
stuttering economic recovery in the euro zone, while a surprise
Czech centre right victory in last weekend's general election
has raised economists' expectations for deep fiscal tightening.
But central bank Vice-Governor Miroslav Singer said none
were "tectonic shifts" with direct implications for Czech rates.
"There has not been an event that would force me to think
that something should be changed," Singer told Reuters. "Things
are moving pretty much in a way that we expected."
Singer repeated a metaphor comparing the Czech easing cycle
to an object falling in a glass filled with a mix of water and
jelly. The rate of decline slowed at the bottom, meaning the
board would find it harder to cut rates further.
"For the board, it's more difficult to cut. I still feel
this. We have a historically unprecedented low rate," he said.
"For me it's probably not that much jelly as for some of my
colleagues. But for forecasting of our next moves, we are in the
jelly," he added.
Most analysts see Czech rates on hold until the end of the
year or early 2011 before a hike comes, although some say one
more cut is possible amid tame price pressures and concerns over
recovery following last year's 4.1 percent economic contraction.
"Maybe... we will simply stay here for a while and then
start moving up," Singer said. "It's perfectly imaginable."
THE CROWN, ELECTION
Singer said the crown exchange rate was typically an element
that could bring a surprise in policy decision making.
But in a rare comment on the currency, Singer said concerns
the bank's May 6 cut would push the unit weaker, because of
market swings exaggerated by the Greece crisis and from the rate
differential with the euro zone, did not materialise.
"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," he said.
The crown <EURCZK=> weakened 0.5 percent just after the May
cut to 26.22 per euro but has gained since then to 25.77 percent
on Wednesday. The bank forecast the average exchange rate at
25.2 in the second quarter and at 25.3 for the whole of 2010.
On Monday, the unit jumped as much as 1.6 percent to 25.42
after cost-cutting centre-right parties won a strong majority in
the weekend vote.
"The crown is pretty much in an interval where it is
absolutely fine to me. Even (after) this positive effect of what
happened on Monday," Singer said.
Singer said the compromise programme coalition partners will
finally be able to agree on is likely to be "less radical" than
now assumed and will be rather centrist than rightist.
He also said he saw only a small impact on monetary policy
and played down concerns among some economists that overzealous
fiscal tightening could hit growth.
"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," he said.
On the euro zone, the Czechs' main trading partner, Singer
said factors such as liquidity measures by the European Central
Bank and fiscal tightening undertaken by countries struggling to
reduce their debt appeared to be balancing out with a relatively
neutral impact on the Czech economy.
"Both the restriction on the fiscal side and ... the
loosening of euro zone monetary principles are, with respect to
our decision making, more or less balanced," he said.
(Editing by Toby Chopra)
