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.
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