Mr. Singer said that the weak-koruna policy has persuaded Czechs that the central bank won’t allow consumer prices to fall, and removed the risk of a slide into a prolonged period of deflation. Central bankers aren’t worried so much about falling prices as about the threat that consumers and businesses will come to expect prices to continue to fall and will postpones their purchases, weakening economic growth and pushing prices down further. “We were afraid of this problem of postponed consumption and investment,” Mr. Singer said. “But people have realized the central bank is not going to allow a deflationary slide.”  BIS central bankers’ speeches  1  Mr. Singer said that retail sales are picking up, driven by higher auto sales, an indication that consumers aren’t postponing purchases in the expectation goods will be cheaper in the future. He cited a decline in the savings rate as another indication that the risk of deflation has been lessened. The central-bank chief said that while food prices may rise at a slower pace in response to a good harvest, he was not worried about that development because people can’t postpone food purchases. Measured according to an EU standard, the annual rate of inflation in the Czech Republic picked up to 0.7% in August from 0.6% in July, and Mr. Singer said he is confident it will rise to the 2.0% midpoint of the central bank’s target range next year, assuming the eurozone follows a “baseline scenario” of a return to modest growth.
Miroslav Singer: Czech central bank head sees lowered risk of deflation – interview in The Wall Street Journal Interview with Mr Miroslav Singer, Governor of the Czech National Bank, in The Wall Street Journal, conducted by Paul Hannon on 11 October 2014. *  *  *  The threat of a slide into deflation or a long period of very low inflation in the Czech Republic has diminished, the head of the country’s central bank said Saturday, although he intends to maintain the weak-koruna policy at least into the start of 2016. In an interview with The Wall Street Journal during the annual meetings of the International Monetary Fund in Washington, Miroslav Singer said he had been encouraged by the stimulus measures announced by the European Central Bank since June, since he had expected it to take longer to react to very low inflation rates. Mr. Singer also said that he was confident the central bank could bring its weak-koruna policy to an end without risking a “snapback,” or a sharp strengthening of the currency. The Czech Republic is a member of the European Union, but has chosen not to use the euro. It does have close economic ties to the currency area and particularly Germany. As a result, low growth and low inflation in the eurozone have been a big problem for the central bank.