Wires

UPDATE 1-Czech cbanker says would weaken crown if needed- paper

Share

* Deflation pressures decisive for potential interventions

* Bank not in situation now to debate specific details

* says FX has recently appreciated relatively markedly

(Adds quotes, details)

PRAGUE, Oct 11 (Reuters) - The Czech central bank is readyto intervene to weaken the crown currency if it feels there is arisk of long-term deflation pressures, Governor Miroslav Singerwas quoted as saying on Monday.

But the bank is not currently discussing details about anysuch intervention, he said in an interview with dailyHospodarske Noviny.

The bank cut the key two-week repo rate torecord low 0.25 percent on Sept 27 and signalled intervention onthe foreign exchange market would be the next tool it would useif there was a need to ease policy more than by what is left oninterest rates.

Policymakers are seeking to boost demand in the small andopen central European export-reliant economy which has been in arecession since the final months of last year mainly due to afall in private consumption caused by government austerity andpoor consumer sentiment.

Singer said in the interview FX interventions were a logicalnext tool in a country which exports products worth 80 percentof its GDP.

"If we had the feeling that there is a threat of long-termdeflation pressures, an obvious way how to tackle that would bethrough weakening the currency," the daily quoted him as saying.

He mentioned real estate prices which have been falling inthe past years as demand faltered.

"The main thing now is that people do not get the feelingthat (real estate prices) will continue to fall for ever. Thiscan sometimes happen and for us it could be a reason for whichwe would have to intervene."

Singer said the bank did not have a "dramatically goodfeeling" about the current crown rate.

"The exchange rate has recently appreciated relativelymarkedly and it is stronger than projected in our forecast," hesaid.

Singer's comments helped send the crown 0.5 percent weakerto 25.034 per euro.

The unit has firmed by 3.35 percent since June 27, shruggingoff two quarter-point reductions in interest rates that thecentral bank has made after more than 2 years of unchangedpolicy.

Singer said the reason for the crown's strength was partlythe positive "image" of the Czech Republic and the centralEuropean region. There has been a shift in investors' mood, hesaid.

"Their (investors') impression that most European problemsstart in this region has changed into a feeling that mostproblems certainly do not begin here and often they do not evencome here."

He said the ability of Czech producers to remain competitiveon global markets was also a reason for the strong currency.

Singer said the bank was not now in a situation when itwould debate specific details of the potential intervention,when asked if the bank has set specific levels that it wouldtarget in the intervention.

"We are not in a situation that we would debate this. Andeven if we were debating it, specific interventions are a thingthat one is not expect to talk about."

(Reporting by Jana Mlcochova; Editing by Jeremy Gaunt)

((jana.mlcochova@thomsonreuters.com)(+420 224 190 479)(ReutersMessaging: jana.mlcochova.reuters.com@reuters.net))

Keywords: CZECH CBANK/