Czech central bank's Hampl: rates should already be above 1 pct -Ekonom


PRAGUE, June 7 (Reuters) - The headline Czech interest rate should already be above 1 percent as the economy is feeling the effects of overheating, central bank vice-governor Mojmir Hampl said in an interview published on Thursday.

"A state in which we feel in every corner overheating of the economy and at the same time we are still with the base rate below 1 (percent), is unprecedented," he was quoted as saying by weekly magazine Ekonom.

The bank's model, Hampl said, showed rates should be between 2 and 3 percent at this stage of the economic cycle.

Markets are betting on a fourth Czech rate hike by September, sooner than the bank's staff outlook that points to a rise around the end of the year.

Hampl said he did not share worries raising rates would lead to excessive crown firming at a time when the European Central Bank has yet to budge from its ultra-loose policy.

He added the correlation between interest rates and the exchange rate is not the same as before.

The crown, which opened trading on Thursday at 25.670 to the euro, has been hit in recent months with other central European currencies amid emerging market selloffs. It is almost 2 percent weaker than assumptions built into the central bank's outlook.

At the same time, the economy is forecast to grow nearly 4 percent this year while wage data this week showed the biggest real rise in 15 years. Governor Jiri Rusnok said on Tuesday that crown weakness and wage growth was opening some space for rate hikes.

This article appears in: Stocks , World Markets , Politics

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