Czech Republic: Central Bank leaves interest rates unchanged, signals possible exchange rate intervention
March 28, 2013
At its 28 March monetary policy meeting, the Czech National Bank (CNB) left the two-week repurchase rate unchanged at a record-low of 0.05%, in a decision widely expected by the market. The Central Bank has refrained to modify its stance since it decided to cut the two-week repo rate by 20 basis points in November 2012.
The CNB argued that it will keep interest rates at the current level for an extended period unless inflation pressures increase significantly. However, monetary authorities emphasized that the Bank is ready to use foreign exchange interventions "if further monetary policy easing becomes necessary". The CNB acknowledged that the economy contracted more than expected in the final quarter of 2012 and that recent economic indicators show sluggish economic activity at the outset of the year. In addition, the Bank foresees that inflation pressures will remain contained. The next policy meeting is scheduled for 2 May.
Economists polled by FocusEconomics expect that the Central Bank will maintain the two-week repo interest unchanged at 0.05% throughout the rest of this year, with an average rate of 0.08%. For 2014, participants see the two-week repo rate at 0.53%.
Author: Ricardo Aceves, Senior Economist