Czech National Bank Keeps Two-Week Repo Rate at 1.25%

September 24, 2009

The Czech central bank made no further rate reduction for the second time in its last three meetings, which was the result expected by most analysts.  However, two of seven policymakers voted in favor of a 25-bp cut to 1.0%.  From a peak of 3.75%, the two-week repo rate had earlier been reduced by 25 bps in August 2008, 75 bps in November, 50 bps in December and again in February, 25 bps in May and 25 bps on August 6, 2009.  Real GDP edged up 0.1% last quarter but slumped 5.5% in the year to 2Q09.  On-year comparisons stand at minus 18.2% for industrial output, minus 4.9% for retail sales, minus 5.0% for producer prices and minus 0.2% for the CPI.  The central bank targets consumer price inflation at 3%, and a statement released today projects such not returning to the target range floor of 2% until 1Q11.  GDP is expected to expand just 0.4% in 2010 followed by a still-tepid 1.6% in 2011.  The two dissenting votes indicate that the central bank may not quite be done cutting interest rates.

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

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