Czech National Bank Leaves Two-Week Repo Rate Unchanged
November 5, 2009
The majority decision to retain a 1.25% benchmark interest rate matched the unchanged ECB rate of 1.0% announced today, but three of seven Czech monetary policymakers dissented in favor of a 25-basis point cut to 1.0%. That was one more dissenter than at the prior policy meeting on September 24th, which also had opted for no change in rates. The minority’s preference would have eliminated the Czech rate premium vis-a-vis the ECB. Beginning with a 25 basis point cut in August 2008 and ending with a reduction of similar size one year later, officials had in total cut the key rate by 250 basis points from a prior high of 3.75%.
Today’s statement from Czech monetary officials revised projected GDP growth in 2010 upward from 0.8% to 1.4% but indicated that lessening export demand, labor market sluggishness, and fiscal restraint would lead to decelerating activity as the year evolves. GDP in 2009 will have declined more than 4%. Fourth quarter-over-fourth quarter CPI inflation is now projected to be 2.4% next year and 2.2% in 2011. However, core inflation, which excludes rising indirect taxation, should be less. Officials target medium-term inflation at 2%. The major inflation risk factor is the possibility of a depreciating kuroda.
Copyright Larry Greenberg 2009. All rights reserved. No secondary distribution without express permission.
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