* Czech rates seen flat for longer than before
* Budget cuts unlikely to hit growth very strongly
By Jana Mlcochova and Michael Winfrey
PRAGUE, July 8 (Reuters) - Czech interest rates will likely
stay at record lows for longer than earlier assumed and European
austerity measures will probably not hit the economy too hard,
central bank Governor Miroslav Singer said on Thursday.
Borrowing costs in the central European economy are at a
record low, with the main two-week repo rate <CZCBIR=ECI> at
0.75 percent, after eight cuts in the last two years.
Markets are pricing in no change for at least the rest of
the year. Singer, who replaced Zdenek Tuma in the governor's
seat on July 1, reiterated that it was extremely difficult to
cut rates further from these levels and saw them staying stable.
"There is quite a fair chance that the current rates will
stay with us for longer than people thought," Singer told
Reuters in his first interview with international media after
being appointed.
"If you ask me personally, I don't see any reason for an
abrupt change, given how things are developing."
Singer's comments echoed remarks by his deputy, Mojmir
Hampl, who said last week new "growth-hurting and
inflation-decreasing developments" coming mainly from the euro
zone were likely to keep Czech rates flat for longer.
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Singer, 42, who worked as a researcher and lecturer and
consultant before joining the central bank in 2005, said he did
not expect a major change in an updated policy outlook the bank
will release on Aug. 5.
He added that the incoming centre-right government's plans
to cut the budget deficit to 4.6 percent of gross domestic
product (GDP) next year, as well as plans to cut budget deficits
in the country's main export markets in the euro zone would only
start having an effect on the economy next year.
But he said a greater dependence on exports than on domestic
demand and the fact that type of goods produced by the Czechs --
cars, steel and electronics -- did not typically suffer much
from budget cuts meant growth would not be hit too hard.
"Our exports do not depend that much on Greek austerity
measures. Our exports are related to German exports," he said.
"We might be hit less than someone who produces food
products for the upper-middle-class EU segment. That's why I
don't expect the measures to have such a big impact on the Czech
Republic."
RISKS BALANCED, CZK NO CONCERN
The bank forecasts a W-shaped recovery for its 18-month
policy horizon, although the second dip would just mark a
slowdown in growth to 0.7 percent in the first quarter of 2011,
much milder than the 4.7 percent contraction in the second
quarter of 2009.
On inflation, "the risks are pretty balanced or maybe
slightly leaning to the anti-inflationary side, but there's
nothing that significant," he said.
He saw no imminent threat coming from the crown currency
<EURCZK=>, which has appreciated about 1 percent over the past
week to an almost six-week high of 25.46 per euro.
He also welcomed the Czechs' approach to euro adoption. The
country of 10.5 million has set no date and the incoming
centre-right government has said it would wait for euro zone
members to meet their own economic criteria before setting one.
"Quite frankly I'm happy with the situation we are in," he
said. "There is obviously no rush, and there is no rush from the
euro zone to accept new members... I don't feel any need to
discuss entering the euro before we put our fiscal house in
order because we would not be accepted anyway."
Singer also played down the importance of forecasting data
far into the future.
"In times of high uncertainty and very significant changes
within the EU and the euro zone that we can only influence in a
small extent, it does not make much sense to look at how the
figures will change a year from now," he said.
(Editing by Ruth Pitchford)
