Czech Republic Monetary Policy

Czech Republic

Central Bank stays put for a 15th consecutive month

At its 22 September meeting, the Czech National Bank left the two-week repurchase rate unchanged at a record low of 0.75%, in a decision widely expected by market analysts. The Central Bank has not touched the main policy rate since May 2010, when authorities cut interest rates from 1.00% to 0.75%. At the current level, the two-week repurchase rate remains 75 basis points below the European Central Bank's policy rate. The Central Bank claimed that inflation will remain close to its inflation target of 2.0% 1.0% over the near-term horizon, but monetary officials anticipate that headline inflation will temporarily remain above 3%, as the VAT rate will be hiked in January 2012. Moreover, monetary authorities anticipate economic activity to slow this year as substantial downside risks remain, amid a shaky financial sector and uncertain public finances in developed economies. The next monetary policy meeting is scheduled for 3 November.

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