Czech Republic Monetary Policy

Czech Republic

Central Bank keeps rates at record low, signals exchange rate intervention

At its 1 August monetary policy meeting, the Czech National Bank (CNB) decided to leave the two-week repurchase rate unchanged at 0.05%, a decision in line with market expectations. The Central Bank has maintained the two-week repo rate at a record-low since November 2012 when monetary officials last cut the main monetary policy rate by 20 basis points.

According to the CNB, interest rates will stay at the current level (at "technical zero") for the foreseeable future, as inflationary pressures remain contained and economic activity is depressed. The Bank also argued that, "the likelihood of launching foreign exchange interventions to ease monetary policy has increased further." The CNB pointed out that the economy will decline more than expected this year, while adding that economic growth will recover gradually in 2014. Regarding price developments, monetary officials see inflation remaining below the Bank's target range of 1% to 2%. The next policy meeting is scheduled for 26 September.

FocusEconomics panellists expect that the Central Bank will maintain the two-week repo interest rate unchanged at 0.05% until the end of this year, with the average forecast at 0.08%. For 2014, participants see the two-week repo rate at 0.43%.

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Czech Republic Monetary Policy Chart

Czech Republic Monetary Policy August 2013

Note: 2-week repo rate in %.
Source: Czech National Bank (CNB).

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