Czech Republic: Central Bank maintains rates unchanged, continues intervention in foreign exchange market
December 17, 2013
At its 17 December monetary policy meeting, the Czech National Bank (CNB) decided to leave the two-week repo rate unchanged at 0.05%, a decision that was on par with market expectations. The CNB has kept the two-week repo rate at this record low since November 2012. In addition, monetary officials reiterated their commitment to intervening in the foreign exchange market in order to weaken the Czech koruna against the euro at around CZK 27.0 per EUR. The market had also expected this decision, which seeks to further ease monetary policy.
The Central Bank stated that it will keep the exchange rate close to CZK 27.0 per EUR, "at least until early 2015," pointing out that interest rates will stay at technical zero and inflation remains low. The Bank underlined that economic growth deteriorated more than expected in the third quarter. In addition, the Central Bank stated that the labor market remains weak, but that recent industrial production data show some positive signs.
Analysts polled by FocusEconomics panelists expect that the Central Bank will maintain the two-week repo interest rate unchanged at 0.05% until the end of 2013, with an average forecast of 0.05%. For 2014, participants see the two-week repo rate at 0.15%. Meanwhile, forecasters expect the Czech koruna to trade at CZK 25.8 per EUR by the end of 2013. By the end of 2014, participants expect the koruna to trade at CZK 25.3 per EUR.
Author: Ricardo Aceves, Senior Economist