Czech deputy sees "significant" rate rise

Niedermayer told Thomson Financial News in an interview last week that the changing structure of the economy means that the central bank could not simply rely on an appreciation of the Czech crown to bring inflation down.

"In the past the crown was appreciating and this reduced the inflationary pressures on the economy," Niedermayer said before adding that a "cooling of the inflationary pressures by means of an appreciating currency, given low interest rates and a high interest rate differential, is less probable."

The Czech central bank has raised interest rates by 50 basis points to 3% so far this year. The economy has grown at close to 6% in the past two years.

Despite strong growth, Czech rates remain the lowest in the European Union, making the crown a financing currency for carry trades. Niedermayer suggested that interest rates may have to settle after 3% in the long run.

"For the stage at which the Czech economy is at now, interest rates should be higher," Niedermayer said.