Czech central bank has room for rate cuts, IMF says
Adds further details in paragraphs 2-9
PRAGUE, Nov 26 (Reuters) -The Czech central bank has room for additional rate cuts to reach a neutral policy rate of around 3% by mid-2025, the International Monetary Fund (IMF) said in a concluding statement published on Tuesday.
The central bank has cut its main interest rate CZCBIR=ECI to 4.00% from 7.00% since last December but has signalled a pause may be nearing.
"With inflation expectations broadly anchored and output below potential, the current (monetary policy) stance remains tight," the IMF said.
"This leaves room for additional rate cuts to achieve a neutral policy rate by mid-2025, which IMF staff estimates at around 3%, albeit subject to large uncertainty."
It also said the central bank should consider reducing the size of its balance sheet over time.
The IMF said it expects inflation to rise above 3% in the near term, but that it would fall back towards 2% by mid-2025.
Risks to the inflation outlook appeared balanced, it said, but risks to its expectations that economic growth would accelerate to 2.4% in 2025 from a projected 1% in 2024 were skewed to the downside.
"Further geoeconomic fragmentation, a weaker than anticipated recovery among key European trading partners, especially Germany, and stronger than expected effects of past monetary policy tightening point to downside growth risks," the IMF said.
The budget deficit would remain below 3% of gross domestic product (GDP) this year but would likely be a quarter of a percentage point higher than the authorities forecast of 2.3%, it said.
Reporting by Jason Hovet in Prague, Alan Charlish, Pawel Florkiewicz in Warsaw
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