Virtual Zero Interest Rate Policy Continuing in Czech Republic

December 19, 2012

Officials in the Czech National Bank voted unanimously to leave the two-week repo rate at 0.05%.  Such was cut 20 basis points on November 1, 25 bps on September 27, and 25 bps on June 28.  Previously, the key central bank was lowered from a pre-Great Recession high of 3.75% to 1.0% by end-2009 and 0.75% in May 2010.

A presentation by monetary officials defended their ZIRP policy, pointing out that the economy is in recession with continuing subdued activity in the last quarter of 2012 and predicting that monetary policy-relevant inflation will stay under the 2% inflation target midpoint throughout the monetary policy time horizon.  Moreover, risks to the baseline inflation forecast are slightly skewed to the downside.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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