Czech Republic: Central Bank remains on hold
May 3, 2012
At its 3 May monetary policy 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 private sector analysts. The Bank's decision means that monetary officials have not altered 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. As in previous statements, the Central Bank argued that inflation will rise temporarily as a result of the January VAT increase, but will fall back below the Bank's 2.0% +/- 1.0% inflation target in 2013. Moreover, monetary authorities acknowledged that subdued domestic demand and moderate wage growth "are currently curbing inflation". In addition, monetary officials pointed out that the economy will stagnate this year as a result of the marked slowdown in external demand and fiscal consolidation. The next monetary policy meeting is scheduled for 28 June.
Author: Ricardo Aceves, Senior Economist