Czech National Bank Leaves Two-Week Repo Rate Unchanged at 0.75% Again

March 24, 2011

The last two-week repo rate change, a 25-basis point reduction in May 2010, culminated 300 basis points of easing in eight moves from August 2008.  According to a statement posted today on the CNB’s website, today’s site drew just a single dissent in favor of a 25-basis point tightening compared to three dissents at the previous meeting seven weeks ago; however, one of the previous dissenters is no longer on the Policy Board, and another missed today’s meeting.  CPI inflation ended 2010 at an above-target 2.3% but is now below 2% at 1.8%.  Officials expect actual inflation to hold near target for the next 18 months and imply a rate increase not until later this year as a scheduled value added tax hike in 2012 nears.  Koruna strength and domestic economic slack remain disinflationary forces to counter the impact of elevated commodity prices.  With the key interest rate remaining at 0.75%, the premium offered by the ECB repo rate is poised to widen to 50 basis points next month.  The next two Czech monetary policy meetings are scheduled for May 5 and June 23.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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