Czech Monetary Policy Unchanged

June 23, 2011

The Czech Central Bank Board reaffirmed the 0.75% level on its key two-week repurchase rate.  Eight reductions from August 2008 to May 2010 totaled 300 basis points.  The last cut from 1.0% to 0.75% in May of last year was the only rate change made in 2010.  Today’s action was universally anticipated.  Current CPI inflation of 2.0% matches the central bank’s medium-term target.  Unemployment exceeds 8.0%, and although on-year GDP growth of 2.8% in the first quarter surpassed official expectations, the expansion rate should be slower than that later this year.  The brewing Euroland debt crisis gave extra incentive to officials not to tighten policy now, instead leaving their key rate 50 basis points below the ECB refinancing rate.  In spite of that rate spread, the koruna has appreciated about 3% against the euro since end-2010.  A statement released today points to steady interest rates over coming months before a gradual rise starting later in the year.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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