The Czech central bank expects market interest rates to remain stable this year and to start easing only after the start of next year, the bank said in its quarterly inflation report. At its monetary policy meeting on February 2, the bank board voted to leave the base rate unchanged at a record low of 0.75%. The bank hasn't changed its headline rate since May 2010. The bank expects headline inflation to speed up to just above 3% in 2012 due mainly to a VAT increase and then it will fall below the 2% target at the start of 2013. Monetary-policy relevant inflation will be close to the inflation target over the entire forecast horizon with a slightly declining tendency. Domestic economic activity will remain at 2010 level curbed by a sizeable slowdown in foreign demand and continuing domestic fiscal consolidation. The Czech economy is to rebound by 1.9% in 2013 with the recovery in external demand. The local currency is expected to gradually appreciate against the euro over the forecast horizon, the bank said.
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