Singer: Budget package to raise inflation above 3% next year

Prague, Oct 14 (CTK) - The approved budget package for next year will apparently increase inflation by 1.3 percentage point and inflation may exceed 3 percent at the end of 2010, vice-governor of the Czech National Bank (CNB) said in a website presentation.

The CNB set a new inflation target at 2 percent as of next year.

The August forecast of the central bank put overall inflation at 1.3 percent in the third quarter of 2010 and at 1.9 percent in Q4 of that year.

The savings package aimed to cut the state budget deficit to Kc163bn was passed by parliament early in October.

"Despite short-term measures, the fiscal policy represents the biggest mid-term risk to the macroeconomic development," Singer said in the presentation.

The unresolved problems of public finances are the high share of mandatory expenditures, no pension and health care reforms and the budget process that is insufficiently transparent, said Singer.

Singer and CNB governor Zdenek Tuma voted for a rate cut by 25 basis points at the last policy meeting at the end of September. The remaining five members of the Bank Board voted to leave interest rates unchanged. The benchmark rate has remained at a record low of 1.25 percent as a result.