Friday, February 3, 2012

Czech National Bank Holds Interest Rate at 0.75%

The Ceska Narodni Banka held the two-week repurchase rate at 0.75% as expected, and kept the discount rate unchanged at 0.25% and Lombard rate at 1.75%.  The Bank said: "Monetary-policy relevant inflation will be close to the target over the entire forecast horizon. Headline inflation will rise temporarily to just above 3% in 2012 owing to a VAT increase, but will fall back below the target at the start of 2013. Consistent with the forecast is stability of market interest rates in the near future and a modest decline thereafter. The risks to the forecast are balanced."

The Czech central bank also kept the repurchase rate unchanged at its November meeting last year; its last change was a 25 basis point cut in May 2010.  The Czech Republic reported annual inflation of 1.8% in September, compared to 1.7% in August and July, 1.8% in June, 2% in May, 1.6% in April, and 1.7% in March this year, and within the Bank's official inflation target of 2%.  

The Czech economy contracted -0.1% in Q3, and grew 0.1% in Q2 (0.9% in Q1) last year, placing annual GDP growth at 1.2% in Q3, 2.2% in Q2 (2.8% in Q1).  The Czech Republic's currency, the Koruna (CZK) has weakened about 8% against the US dollar over the past year, and the USDCZK exchange rate last traded around 18.96


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