Czech National Bank

December 22, 2016

Since November 2012, the Czech two-week repo rate has been a mere 0.05%. A year after dropping to that level, an additional asymmetric foreign exchange rate policy was added to the monetary policy toolkit, stipulating that inflation would be used to prevent the koruna from strengthening beyond the 27 per euro level but not to resist depreciation relative to that cap. After the latest policy review, these positions were reaffirmed. A released statement says the koruna cap will not be released before the middle of next year at the earliest and observes mixed developments. While growth in the third quarter was lower than expected, November inflation was somewhat above expectations because of pressures on food. Inflation is still under the 2% target. All in all, the policy risks appear balanced.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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