* Rusnok sees FX floor lifted after summer of 2017
* Bank forecast mid-2017 move after Aug policy meeting
* Governor spoke after crown gains in forward market
* Says bank ready to intervene after cap lifted
* Crown capped on weak side of 27/eur since 2013
(Adds comment, background)
By Robert Muller
OSTRAVA, Czech Republic, Sept 13 The Czech
central bank expects to remove its cap on the crown in the
second half of next year, its governor said on Tuesday,
cautioning markets against betting the currency will be allowed
to strengthen before mid-2017.
The central bank has held the crown on the weak side of 27
per euro since 2013, buying billions of euros in the foreign
exchange market to keep monetary conditions easy and revive
The bank said after its August policy meeting, the first
with Jiri Rusnok as governor, that the exit would most probably
come in mid-2017.
But he said on Tuesday the way the bank's inflation outlook
was developing now pointed to a slightly later move.
"From how the forecast is being fulfilled so far, it is
probably rather a question of the second half, rather after the
(summer) holidays next year," he told reporters after meeting
businessmen in Ostrava, a northeastern industrial city.
The bank wanted to make sure annual inflation was on path to
"robustly" meet its target of 2 percent before lifting the cap,
Czech summer holidays run from the beginning of July to the
end of August.
A solid performance by the economy along with Rusnok's
suggestion in a magazine interview last week that inflation need
not be exactly at target at the moment of exit raised
expectations that the bank might drop the exchange rate floor
earlier than mid-2017.
That pushed implied forward crown exchange rate levels to
multi-month highs last week.
One economist said Rusnok's words amounted to an attempt to
talk the forward rate down.
"A move in the end of the exchange rate commitment can calm
down the situation in the forward market," said Marek Drimal,
economist at Komercni Banka.
"Rusnok's comments has the effect of a verbal intervention
to maintain relaxed monetary conditions."
Implied crown rate forwards for six months ahead weakened to
26.87 the euro on Tuesday, from 26.855 on Monday
and 26.78 hit last week.
The governor also said the bank would prefer inflation
heading into the upper half of its tolerance band of 1-3 percent
when it decided on the exit.
The central bank's sees inflation reaching 2.2 percent in
the third quarter of 2017, from just 0.6 percent in August.
Rusnok reiterated the bank's line that it would not allow
any sharp firming of the crown after the cap is removed.
"That would not be justified by the state of the Czech
economy, so... we will return to the market if the situation
The economy has been growing robustly, driven by trade and
consumption, with gross domestic product expanding by 2.6
percent in the second quarter.
(Additional reporting by Jan Lopatka; Editing by Jason Hovet
and John Stonestreet)