Dovish Czech Central Bank Statement

September 22, 2011

The two-week repo rate was left unchanged at 0.75%, its level since a 25-basis point cut in May 2010.  The decision was expected and reached by unanimous vote.  At the previous two meetings, by contrast, two of the seven policymakers had dissented in favor of a 25-bp rate hike.   From August 2008 through May 2010, eight rate reductions were doled out totaling 300 basis points.

Today’s statement for the Czech Central Bank has a baseline interest rate forecast of steadiness in the near term followed by a gradual uptrend.  However, officials now identify risk surrounding that estimate to lie “substantially to the downside” because of the turmoil rocking world and regional financial markets.  Core inflation is projected to hold just above the midpoint of the 1-3% target range, and headline CPI may exceed 3.0% temporarily after a planned VAT hike is implemented in January.  Real GDP growth slowed to 0.1% in the second quarter and was 2.2% greater than a year earlier.  Like the Polish and Hungarian currencies, the Czech kurona has lately been easing against the dollar.

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

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