Thursday, March 28, 2013

Czech holds rate steady, zero until inflation pressures rise

    The Czech Republic's central bank left its benchmark two-week repo rate steady at 0.05 percent and said rates would remain at its current level of technically zero "over a longer horizon until inflation pressures increase significantly."
    In a statement following a meeting of the Czech National Bank (CNB) board, the bank said it was also ready to use foreign exchange interventions "if further monetary policy easing becomes necessary."
    The CNB, which cut rates by 70 basis points in 2012 but has held them steady this year, said its forecast calls for a slight decline in market interest rates and then a rise from mid-2014 and inflationary pressures are not expected to rise and there were "no tangible risks of such an increase in inflation pressures" at the present.
    Inflation in the Czech Republic fell to 1.7 percent in February from January's 1.9 percent. The CNB targets inflation of 2.0 percent, plus/minus one percentage point.
    The Czech economy more than forecast in the fourth quarter and in 2012 Gross Domestic Product shrank by 1.2 percent, the bank said.

    Fourth quarter GDP contracted by 0.2 percent from the third, the sixth quarterly contraction in a row, for annual shrinkage of 1.7 percent, up from 1.5 percent in the third quarter.
    The CNB said data from industrial production, construction output and retail sales in January point to subdued economic activity and the labor market remains weak.


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