PRAGUE (Reuters) - There is no reason to deploy unconventional monetary policy tools to support the recession-hit Czech economy for the time being, central banker Lubomir Lizal said on Sunday.
But he said he agreed with Vice Governor Vladimir Tomsik who said last week that delaying cutting interest rates further from the current record low 0.5 percent would create the risk of having to ease more sharply later.
"It (sharper easing steps) can either be a more dynamic decline in the interest rate, or it can be some non-standard measures, non-standard monetary policy," Lizal said in a TV debate on public channel CT24.
"However, I would not open this (using non-standard measures) yet because there is no reason for it for the time being."
The Czech economy began shrinking towards the end of last year as government efforts to cut the budget deficit hit consumption and investment.
Major central banks have adopted various measures to pump extra money into the economy, such as long-term loans to banks and outright purchases of securities from the market, after running out of scope to cut official interest rates.
The Czech central bank kept its two-week repo rate on hold on August 2, with Lizal and Tomsik voting in minority for a cut to 0.25 percent.
At that meeting central bankers had a new staff forecast at their disposal which projected a worse economic performance than the previous outlook and a steeper decline in market interest rates, implying a negative two-week repo rate next year.
Tomsik had said following that meeting the bank was ready to use any tools, whether conventional or unconventional, to meet its rate outlook, crucial for its inflation forecast.
But he did not specify whether a negative repo rate was a real possibility or whether the bank would prefer to try other ways to drive down borrowing costs.
Lizal also said in the TV debate the bank may have to cut its gross domestic product outlook further, after the second quarter preliminary GDP estimate showed a 1.2 percent annual contraction, much worse than the bank's expectations of a 0.4 percent drop.
(Reporting by Jana Mlcochova; Editing by Ruth Pitchford)
