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Czech Republic Monetary Policy March 2019

Czech Republic: CNB stays put amid worsening external-sector anxieties

On 28 March, the Czech National Bank (CNB) kept the two-week repo rate unchanged at 1.75%. Five members of the committee voted in favor of the decision, while two members opted for a rate hike. Moreover, the CNB left both the Lombard and discount rates also unchanged at 2.75% and 0.75%, respectively. All announcements landed in line with analysts’ expectations.

Policymakers took a predictably cautious approach to the cooling global economy and risks like Brexit, maintaining a dovish posture that still leaves the door open to a handful of rate hikes later this year. Moreover, the European Central Bank’s recent pullback left plenty of room for the CNB to press ‘pause’. Further justifying policymakers’ hold-off, they also reassessed risks to the inflation outlook as “broadly balanced” from “slightly inflationary”.

Forward guidance was little changed; inflationary risks, on balance, will stem from the pace of the appreciation of the koruna and the severity of the global downturn. As it stands, policymakers have kept their options on the table and expect some tightening this year

Policymakers will meet again on 2 May.

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