Czech Republic: Central Bank signals possible exchange rate intervention if necessary
May 2, 2013
At its 2 May monetary policy meeting, the Czech National Bank (CNB) left the two-week repurchase rate unchanged at 0.05%, in a decision expected by the market. The Central Bank has maintained the two-week repo rate at the record-low since officials decided to cut it by 20 basis points in November 2012.
As in previous statements, the Bank argued that interest rates will remain at the current level unless inflationary pressures rise significantly. In addition, monetary authorities emphasized that the Bank is ready to use foreign exchange interventions "if further monetary policy easing becomes necessary". The CNB underlined that inflation will fall below the Bank's target of 2.0% this year and next, while it acknowledged that the economy will contract more than expected this year, amid the ongoing fiscal consolidation. The next policy meeting is scheduled for 27 June.
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 0.43%.
Author: Ricardo Aceves, Senior Economist