Czech c-bank holds rates close to zero, says probability of FX interventions stays high

By bne IntelliNews September 26, 2013

The Czech central bank decided on Sept 26 to keep interest rates at record-low levels in line with market expectations and said that the probability of launching foreign exchange interventions to further weaken the monetary condition remains high.

The bank’s board voted unanimously to keep the main two-week repo rate at 0.05% for the seventh 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 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 economy that has just emerged from a record-long recession. After at the previous meeting on August 1 the bank’s board held its first vote on FX interventions and did not approve the motion, on Sept 26 the board again voted and again the motion failed to be backed by the majority of rate setters, governor Miroslav Singer told a news conference after the meeting. Recent economic data showing an improving economy are arguments for the central bankers who want the bank to hold off on koruna sales but slowing inflation warrants a move to weaken the koruna. A weaker local currency will boost exports that account for some 80% of the country’s economic output, increase import prices and limit deflation risks.

The koruna strengthened against the euro after the bank voted against currency interventions. It traded at 25.692 per euro by 1345 GMT on Sept 26, up 0.6% on the day, Reuters reported.

The bank's current forecast assumes a decline in market interest rates to zero followed by a noticeable hike in 2015. Inflation pressures are expected to stay muted. The risks to the inflation forecast are slightly on the downside, tiled towards the need for slightly easier monetary conditions, the bank said.

Related Articles

Hungarian PM's "proxy" moves into the nuclear industry as Paks tenders approach

Firms controlled by Hungarian oligarch Lorinc Meszaros have purchased a 51% stake in the Hungarian subsidiary of Czech nuclear ... more

Czech PM accepts new nominee for finance minister

Reducing the political tension in the country a little, Czech Prime Minister Bohuslav Sobotka accepted on May 17 the nomination of a new finance minister from coalition partner Ano. Meanwhile, ... more

RBI doubles net profit y/y in Q1 as Russian business recovers

Raiffeisen Bank International (RBI), the second largest bank operating across Central and Eastern Europe by assets, reported that net profit almost doubled year-on-year to €220mn in the first ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss