Another Czech interest rate hike cannot be ruled out if major central banks continue raising policy rates and inflation looks to be persistent, the central bank's governor and his deputy said at the June 21 policy meeting, minutes showed on Friday.
The Czech National Bank (CNB) left its key two-week repo rate unchanged at a more than two-decade high of 7.00% at the meeting, and the minority pressing for a further hike shrank.
The bank, in comments made right after the meeting, pushed back against market expectations seeing chances of a rate cut as early as September.
"A majority of the board members agreed that interest rates would remain at current or higher levels for longer," the minutes said.
"According to (Governor) Ales Michl and (Vice-Governor) Jan Frait, a hike at a future meeting could not be ruled out if key central banks continued to increase their monetary policy rates and inflation appeared to be persistent."
With Czech inflation cooling and likely to fall to a single-digit rate in coming months, markets have increased bets on the extent of rate reductions, with forward rates implying at least 75 basis points in cuts by the end of 2023.
Another vice-governor, Eva Zamrazilova, said in the discussion it was too soon to seriously discuss lowering rates.
Board member Jan Prochazka, who voted for unchanged rates after supporting a hike at the previous meeting, said starting a cutting cycle "prematurely" could boost domestic demand and lead to a need to raise rates again next year, according to the minutes.
In June 21's 5-2 vote, board members Tomas Holub and Karina Kubelkova backed a 25 basis point increase.
"According to Tomas Holub, this meeting was the last chance to raise rates in this inflation episode, then the only viable strategy would be to keep them 'higher for longer', which, however, he regarded as suboptimal," the minutes said.
(Reporting by Jason Hovet; editing by John Stonestreet)