Czech c-bank expectedly holds rates close to zero, says likelihood for FX interventions has increased

By bne IntelliNews August 2, 2013

The Czech central bank decided on August 1 to keep interest rates at record-low levels in line with market expectations and said the likelihood to launch koruna sales to further weaken the monetary conditions has increased.

The bank’s seven member board voted unanimously to keep the main two-week repo rate at 0.05% for the sixth straight meeting after cutting it down by 20 basis points in November, the bank said in a statement on its website. The Czech rate is at almost half a point below the European Central Bank’s main rate. The Lombard rate that provides a ceiling for short-term interest rates on the money market was left at 0.25% and the discount rate that represents the floor for short-term money market interest rates was kept at 0.05%.

The bank's current forecast assumes a decline in market interest rates to zero followed by a hike in 2015. The risks to the forecast are skewed towards a need for easier monetary conditions. The bank has for months said it is considering stepping into the currency market for the first time in more than a decade to weaken the koruna and help the ailing economy that has slipped to its longest recession on record. At the Aug 1 meeting the rate setters held their first vote on FX interventions and although the proposal failed to win majority support opposing policy makers have softened their resistance, governor Miroslav Singer said.

Following central bank comments, the koruna slightly firmed but later in the day retreated to 25.97 against the euro from Wednesday's close at 25.93, Reuters reported.

The bank said that it will keep rates at current record low levels until inflation pressures increase significantly. For now it does not sees such a threat.

Related Articles

Multilateral lender IIB to place its inaugural transaction in Czech koruna

Moscow-based development bank International Investment Bank (IIB) has priced its denominated private placement transaction with three-year floating rate notes in koruna of CZK501mn, the bank said in ... more

ArcelorMittal proposes to divest assets in Czech Republic, Macedonia and Romania

International steel and mining company ArcelorMittal said on April 13 it has proposed a divestment package to the European Commission in a bid to obtain approval for its planned acquisition of ... more

Finland gives final nod to construction of Nord Stream II

Finland has issued a second and final permit for the construction of the controversial Nord Stream II pipeline that is to pump gas from Russia directly to Germany via a Baltic Sea route, the Regional ... more

Dismiss