Czech National Bank Rate Left at 0.05%

March 28, 2013

From a peak of 3.75% prior to August 2008, the two-week repo rate was slashed to 2.25% by end-2008 and 1.0% by end-2009.  A single 25-basis point cut was made to 0.75% in May 2010, and no other change occurred thereafter until cuts of 25 bps last June, another 25 bps last September, and one final 20-bp reduction in November to 0.05%.  Officials have indicated that a nominal interest rate of 0.05% is rock-bottom and that further easing if needed would be engineered by depreciating the koruna if needed.  1.7% inflation as of February was below the 2% target and is not expected to exceed that threshold in 2013.  The exchange rate has slipped on its own a bit lately, depressed by the Cyprus affair.  Real GDP in the Czech Republic contracted at a 3.2% annualized rate between 3Q12 and the final quarter of the year and was 1.4% lower than in the final quarter of 2011.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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