Czech central banker Benda keeps up support for rate hike

It would be appropriate for Czech interest rates to rise further, central bank board member Vojtech Benda said on Tuesday, because inflationary pressures will be strong and the crown's exchange rate is not helping to tighten conditions.

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PRAGUE, Nov 19 (Reuters) - It would be appropriate for Czech interest rates to rise further, central bank board member Vojtech Benda said on Tuesday, because inflationary pressures will be strong and the crown's exchange rate is not helping to tighten conditions.

"In this moment it appears to be appropriate to tighten monetary conditions through interest rates, with a following relaxation when in the next period domestic inflation pressures will partially recede," he told reporters.

Benda, who has been in the minority backing a rate increase at the last two policy meetings, said he believed it was within the central bank's mandate to be flexible with its policy tools to meet its 2% inflation target.

The central bank's latest inflation outlook assumes rate increases this quarter and next, followed by easing from mid-2020.

Benda said it would not be dangerous for inflation - which stood at a rate of 2.7% in October - to breach the 3% upper limit of its target range.

"But it is important for the central bank to show clearly that in the long term it will do whatever it takes to fulfil the inflation target and be proactive in this and effectively use its tools," Benda said.

The bank has kept its main two-week repo rate at 2.00% since May after tightening rates in the past two years. CZCBIR=ECI

The Czech central bank is among a small group of rate setters keeping open a debate on tighter policy. Most central banks have turned to easing to keep their economies on track.

Benda said he expected the euro zone - which is a key Czech trading partner - would avoid recession, meaning anti-inflationary pressures from abroad would not be so strong.

(Reporting by Robert Muller, writing by Jason Hovet)

((jason.hovet@thomsonreuters.com; +420 224 190 476; Reuters Messaging: jason.hovet.thomsonreuters.com@reuters.net))

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