Czech Republic: Central Bank maintains rates on hold for 18th consecutive month
February 2, 2012
At its 2 February meeting, the Czech National Bank maintained the two-week repurchase rate unaltered at a record low of 0.75%, in a move widely expected by market analysts. The Central Bank has not changed the main monetary policy rate since May 2010. At its current level, the two-week repurchase rate remains 25 basis points below the European Central Bank's main policy rate. In its statement, monetary authorities argued that owing to the government's decision to increase the VAT in January, inflation will rise to just above 3% in 2012, before falling back below the Bank's 2.0% 1.0% inflation target at the start of 2013. Moreover, the Bank foresees that the economy will stagnate this year ?as a result of a marked slowdown in external demand and continuing domestic fiscal consolidation?. On the upside, the Bank predicts GDP growth picking up to 1.9% in 2013, amid gradual recovery in global demand. The next monetary policy meeting is scheduled for 29 March.
Author: Ricardo Aceves, Senior Economist