Czech National Bank Leaves Policy Unchanged

September 29, 2016

Czech monetary officials still expect policy settings to remain as is until mid-2017. The policy interest rate has been at a mere 0.05% since November 2012, and the near-zero interest rate policy was supplemented a year later by the establishment of an intervention-enforced koruna cap at 27 per euro. A statement released today notes that inflation has started to move up but that it’s still well below the 2.0% target. Czech growth slowed last quarter but not as much as anticipated. However, wage growth undershot expectations. ┬áIn discussing likely movement in the koruna after mid-2017 and central bank policy then toward the exchange rate, the statement reiterates

Any exchange rate appreciation following the discontinuation of the exchange rate commitment would be dampened, among other things, by hedging of exchange rate risk by exporters during the existence of the commitment, as well as by the closing of koruna positions by financial investors. In addition, the CNB will stand ready to intervene to mitigate exchange rate volatility.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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