Czech central bank chief warns against premature euro adoption

Czech National Bank Governor Ales Michl warned against adopting the euro before the country's economy is ready, saying such a move could fuel inflation and reduce policymakers' ability to respond to price pressures, Polish broadcaster TVP reported Tuesday.

Speaking to British daily Financial Times, Michl said the Czech economy had not converged sufficiently with the eurozone and argued that the Czech koruna's flexible exchange rate remained an important monetary policy tool.

His remarks challenged Czech President Petr Pavel's support for moving toward adoption of the single European currency.

Michl also rejected Prime Minister Andrej Babis's calls for lower interest rates, saying premature monetary easing could threaten price stability.

The Czech central bank raised its benchmark two-week repo rate by 25 basis points to 3.75% in June, its first increase in four years, citing strong wage growth and persistent inflation in the services sector.