Czech National Bank Cuts Key Rates by 25 Basis Points

August 6, 2009

The benchmark two-week repo rate was lowered to 1.25% from 1.50% as expected in the Czech Republic.  This was the sixth reduction, totaling 250 basis points, of the cycle following cuts of 25 basis points a year ago, 75 bps on November 7, 50 bps on February 5, and 25 bps on May 7.  The new repo rate will be centered between a discount rate of 0.25% and a Lombard rate of 2.25%.  These are the lowest rates since the Czech Republic was founded in 1993.  A statement circulated at the central bank press conference projects a somewhat deeper recession than predicted before, lower inflation in both 2009 and 2010, a slightly lower interest rate path in those years, and a somewhat firmer koruna against the euro next year.  Inflation will lie between zero and 1% into 1Q10, and GDP growth next year will be less than 1.0% despite the resumption of positive growth in the current quarter.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.

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