Thursday, May 7, 2015

Czech holds rate, raises inflation, growth forecast

    The central bank of the Czech Republic maintained its benchmark two-week repo rate at 0.05 percent, along with its commitment to intervene in foreign exchange markets to keep the koruna below 27 to the euro, while it raised its inflation and growth forecast.
    The Czech National Bank (CNB), which has been using the exchange rate as an additional tool to ease monetary policy since November 2013, forecast inflation of 1.5 percent in the second quarter of 2016 and 2.0 percent inflation in the third quarter of 2016.
    This compares with its February forecast of 1.1 percent inflation in the first quarter of 2016 and 1.6 percent inflation in the second quarter of next year.
    The consumer price inflation rate rose to 0.2 percent in March - above the CNB's February forecast of 0.1 percent - from 0.1 percent in the previous three months.
    The forecast for economic growth in 2015 was unchanged at 2.6 percent while the forecast for 2016 Gross Domestic Product growth was raised to 3.2 percent from 3.0 percent forecast in February.
    Czech GDP expanded by 0.4 percent in the fourth quarter of 2014 from the third quarter for annual growth of 1.4 percent, down from 2.4 percent.

    The Czech National Bank issued the following statement:
"The CNB Bank Board decided at its meeting today to keep interest rates unchanged. The two-week repo rate was maintained at 0.05%, the discount rate at 0.05% and the Lombard rate at 0.25%.
The CNB Bank Board also decided to continue using the exchange rate as an additional instrument for easing the monetary conditions and confirmed the CNB’s commitment to intervene on the foreign exchange market if needed to weaken the koruna so that the exchange rate of the koruna against the euro is kept close to CZK 27/EUR.
The CNB Bank Board repeated that it regards the commitment as one-sided. This means that the CNB will prevent excessive appreciation of the koruna below CZK 27/EUR by intervening on the foreign exchange market, i.e. by selling koruna and buying foreign currency. On the weaker side of the CZK 27 level, the CNB is allowing the koruna exchange rate to float according to supply and demand on the foreign exchange market."


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