Czech National Bank

September 26, 2013

The Czech two-week repo rate was kept at 0.05% where such has been since a 20-basis point cut in November 2012.  This is a virtual zero interest rate policy, yet inflation (1.3% from a year ago) and real GDP growth (-1.3% year-over-year) remain low.  The monetary policy bias remains one of ease, but this can only be accomplished using measures other than a further cut in interest rates.  The chosen tool, should a further ease be decided, would be foreign exchange intervention to depreciate the koruna.  While abstaining from such a step at this time, the statement released today asserts that “the probability of launching foreign exchange interventions has not changed and remains high.” 

From a previous high of 3.75%, the two-week repo rate was cut by 150 basis points in 2008 to 2.25%, by 125 bps in 2009 to 1.00%, by 25 bps to 0.75% in 2010, and by 70 bps to 0.05% in 2012.

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

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