Czech Republic: Central Bank keeps rates unchanged, probability of exchange rate intervention rises
June 27, 2013
At its 27 June monetary policy meeting, the Czech National Bank (CNB) left the two-week repurchase rate unchanged at 0.05%, in a decision in line with market expectations. Monetary officials have maintained the two-week repo rate at the record-low since authorities decided to cut it by 20 basis points in November 2012.
The Central Bank argued that interest rates will remain at the current level (at technical zero) in a longer-than-expected horizon, unless inflationary pressures rise significantly. In addition, as in previous meetings, authorities underlined that the Bank is ready to use foreign exchange interventions "if further monetary policy easing becomes necessary", while adding that "the probability of launching interventions is increasing". The CNB stated that the economy declined more than expected in the first quarter, while adding that recent data point to subdued growth. Regarding price developments, the Central Bank sees inflation pressures remaining contained. The next policy meeting is scheduled for 1 August.
FocusEconomics panellists expect that the Central Bank will maintain the two-week repo interest unchanged at 0.05% throughout the rest of this year, with an average rate of 0.08%. For 2014, participants see the two-week repo rate at 0.43%.
Author: Ricardo Aceves, Senior Economist