Czech National Bank Officials Ready to Ease More If Necessary

March 26, 2020

At an intermeeting meeting of the CNB Governing Board on March 16 reduced the two-week repo rate to 1.75% from 2.25%. Minutes of that meeting include forward guidance that further monetary relief may be undertaken.

The Board agreed on the need to lower the CNB’s key interest rates and thereby ease the monetary conditions beyond what was resulting from the weakening of the koruna. The MPC will continue to monitor the situation closely and, consistent with its remit, stands ready to respond further as necessary to guard against an unwarranted tightening in financial conditions, and support the economy.

This month’s rate cut represents an abrupt trend reversal. Seven weeks before in early February with the Czech inflation rate of 3.2% in December constituting a seven-year high, officials had raised the 2-week repo rate by 25 basis points. They had also hiked the rate by that amount in November 2018 and May 2019.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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