Czech National Bank Eases
September 27, 2012
By a vote of five to two, monetary policy makers approved a halving of the two-week repo rate to 0.25%. The previous reduction in June also followed a split vote by the Board, that time of 4-3. The dissenters did not want to cut. Headline inflation will likely be slightly above the 1-3% target range at the end of the policy horizon, but core inflation will dip slightly under 2%. Growth has contracted for three straight quarters and posted an on-year drop of 1.2% in 2Q12. A statement from officials says that economic weakness continued at the start of 3Q and that risks are skewed to the downside. Reductions were also announced today in the Lombard Rate to 0.75% from 1.5% and the discount rate to 0.1% from 0.25%. The two-week repo rate had been at 3.75% prior to August 2008 when such was reduced to 3.5%. Nine subsequent reductions were announced of 75 bps in November 2008, 50 bps in December 2008 and February 2009, and 25 bps each in May 2009, August 2009, December 2009, May 2010, June 2012 and now today.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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