Czech Republic Monetary Policy

Czech Republic

Central Bank keeps two-week repo rate unchanged

At its 6 November monetary policy meeting, the Czech National Bank (CNB) decided to leave the two-week repo rate unchanged at 0.05% for the 16th consecutive meeting. The Central Bank also reiterated its commitment to intervening in the foreign exchange market in order to keep the Czech koruna at around CZK 27.0 per EUR. The floor for the exchange rate was set in November 2013.

In its accompanying statement, the CNB said that economic growth will accelerate in the last quarter of the year. The improvement will be fostered by higher external demand, accommodative monetary policy and a pickup in government investment. In addition, the Bank acknowledged that new jobs are being created and that wage growth, especially in the business sector, is expected to increase noticeably in the near future.

Regarding price developments, the CNB pointed out that headline inflation rebounded in recent months, but that it is still below the lower bound of the Bank’s target range. CNB added that, “[t]he low inflation was due to a continuing decline in administered prices and subdued inflation in the euro area.” Looking ahead, growth in consumer prices is expected to accelerate next year and exceed the 2.0% target at the beginning of 2016.

The majority of economists polled by FocusEconomics expect that the Central Bank will maintain the two-week repo interest rate unchanged at 0.05% until the end of 2014 with an average forecast of 0.06%. For 2015, Consensus Forecast participants see the two-week repo rate at 0.36%. Analysts expect the Czech koruna to trade at CZK 27.1 per EUR at the end of 2014. At the end of 2015, participants expect the koruna to trade at CZK 26.5 per EUR.

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Czech Republic Monetary Policy Chart

Czech Republic Monetary Policy November 2014 0

Note: BoK Base Rate in %.
Source: Czech National Bank (CNB).

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