Thursday, March 27, 2014

Czech holds rate, confirms will intervene to cap FX rate

    The Czech Republic's central bank maintained its benchmark two-week repo rate at 0.05 percent and confirmed its continued commitment to intervene on foreign exchange markets to keep the koruna's rate against the euro close to 27.
    The Czech National Bank (CNB) started using the exchange rate as an additional tool to ease monetary conditions and fight deflation in November, 12 months after it cut the repo rate to the current level. It has committed itself to defend the cap on the koruna until at least 2015.
    "The CNB Bank Board repeated that it regards the commitment as one-side," the bank said about its intervention on foreign exchange markets to prevent excessive appreciation of the koruna below 27 to the euro. On the weaker side of the 27 level, the CNB is allowing the exchange rate to float freely.
    The koruna was quoted at 27.4 to the euro today, slightly down from 27.3 end-2013.
     Inflation in the Czech Republic was steady at 0.2 percent in February and January, sharply down from December's 1.4 percent, but mainly due to a bigger than expected drop in regulated prices.
    The CNB targets inflation of 2.0 percent, plus/minus one percentage point.



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