Czech Republic: Central Bank maintains rates unchanged
December 19, 2012
At its last monetary policy meeting scheduled for 19 December, the Czech National Bank refrained to make a move and maintained the two-week repurchase rate unchanged at a record-low 0.05%, in a decision widely expected by the market. The decision follows on a 20-basis point cut at the previous meeting.
In its statement, monetary authorities recognized that inflation will remain slightly above the Bank's target in 2013, owing to tax increases. However, as the Central Banks focuses on the so-called monetary-policy relevant inflation, which is adjusted for temporary effects such as tax hikes, authorities underlined that inflationary pressures will remain contained over the monetary policy horizon. In addition, the Central Bank added that recent economic indicators continue to suggest weak economic activity, while the labour market exhibits signs of slump.
In contrast to previous meetings, in the press conference following the interest rate decision, Central Bank Governor Miroslav Singer did not mention the possibility of exchange rate interventions as part of the monetary policy toolkit. Singer stated that, for now, the exchange rate is partly offsetting domestic anti-inflationary developments. The next monetary policy meeting is scheduled for 6 February.
Author: Ricardo Aceves, Senior Economist