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Czech central banker Dedek says sees no deviation from bank forecast on rates

Kitco News

PRAGUE, May 19 (Reuters) - There are no fundamental developments that would deviate from the central bank's staff forecast assuming first interest rate hike in the third quarter, new central bank board member Oldrich Dedek told daily Lidove Noviny in an interview to be published on Saturday.

The bank took a first step towards policy tightening on April 6, dropping its exchange-rate ceiling holding the crown on the weak side of 27 per euro for over three years. It left the main two-week repo rate at 0.05 percent.

Dedek, who returned to the board in February after a previous stint as vice-governor in 1999-2005, said the bank would observe data coming in.

"New information keeps coming that influences our decision-making. But personally I do not see any fundamental influences that would mean a significant deviation from our forecast," he said.

The economy expanded by 1.3 percent quarter-on-quarter in the first three months of the year, above market and central bank forecasts, preliminary data showed on Tuesday. April inflation dropped to 2.0 percent, below expectations.

Dedek confirmed the bank was not present in the foreign exchange market since the April end of the weak-crown policy.

The crown has since firmed by modest 1.9 percent to 26.500 per euro on Friday, with further gains prevented by tens of billions of euros worth of long-crown positions built up before April by investors betting on a stronger rise.

Other central banker, Tomas Nidetzky, has said rate rises could come in the second half of this year. Board member Marek Mora spoke in favour of slow increases, while pointing to the bank's forecast seeing first rise in the third quarter. Another board member Vojtech Benda spoke this week of a rate hike within a year.

The bank's quarterly staff forecast from May sees first rate increase in the third quarter of this year. (Reporting by Jan Lopatka)

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