POLL-Czech c. bank seen lifting crown cap in second half of 2017 at earliest
PRAGUE, May 4 (Reuters) - The Czech central bank will keep the outlook for its weak crown policy unchanged when its board meets on Thursday but is likely to later extend it by several months into the second half of 2017, a Reuters poll showed.
At its last policy meeting on March 31, the Czech National Bank (CNB) said it was likely to maintain its weak crown policy until mid-2017..
The central bank has prevented the crown from strengthening beyond 27 to the euro since 2013, in order to help lift inflation after it cut rates to 0.05 percent in 2012. The initial plan was for the cap to be in place at least into 2015.
Ten of 14 analysts polled by Reuters saw an end to the weak crown in the second half of the next year at the earliest, with three predicting the exit to occur only in the first half of 2018.
Compared with a March poll, three analysts moved their expectations for the timing of the exit from the weak currency policy to a later date.
The seven-strong board debated the option of introducing negative interest rates at the March meeting as a further measure to ease policy or defend the weak currency cap, but did not vote on it.
Only two respondents in the poll expected the bank to either move the intervention level or employ negative interest rates before it exits from its ultra loose policy.
Governor Miroslav Singer, whose second and final term ends in July, has said the bank had many tools, including negative rates, but these do not solve demand problems.
"CNB would begin to consider a two-level system of negative rates only if the interventions exceeded 50 billion crowns volume for several months in a row," Jakub Seidler, ING chief economist for the Czech Republic, said in a note.
Another board member and prospective next governor, Jiri Rusnok, had said the probability of using negative rates was low, while the bank was facing a "new normal" of weaker inflation and slower growth.
CNB entered the market last July for the first time since it launched the policy and has since bought billions of euros from the market.
A reshuffle of the bank's governing board in July could influence the duration of the weak crown policy. Czech President Milos Zeman, a critic of the intervention regime, will appoint two new members, including the governor. Rusnok, his preferred candidate for the post, has however backed the crown cap. (Reporting by Robert Muller; Editing by Raissa Kasolowsky)
