Czech central banker renews verbal intervention

By bne IntelliNews October 8, 2015

The vice governor of the Czech National Bank (CNB) offered another verbal intervention on October 8, as he suggested the central bank could extend its cap on the koruna.

The CNB has shown it is serious about keeping its commitment to prevent the koruna from gaining above CZK27 against the euro and that it can keep the cap as long as necessary, Vice Governor Mojmir Hampl said in comments posted on the central bank's website. The CNB has been tussling with investors who are testing the regulator’s commitment to the policy for months.

“Probably due to the fact that after more than a year and a half of not only words but also concrete market activity, (the CNB) has clearly told the world that it is serious about its exchange rate commitment and holding it for a minimum period, at least until the second half of 2016, maybe even longer” Hampl said.

The CNB introduced its weak koruna policy in late 2013 and has since pledged to keep the cap in place until the end of 2016 at least. The country’s strong economic growth (GDP grew by 4.6% in the second quarter – the EU’s second fastest growth) paired with the koruna's status as a safe haven through the Greek crisis, has spurred investors to test the regulator’s limits.

That forced the central bank in July to intervene on the market for the first time since it introduced the policy. Data released on October 7 showed the CNB spent CZK3.7bn in the market in September. 

Though the weak koruna policy has been successful in spurring economic growth, the CNB is also fighting political pressure. There have been calls for the central bank to scrap the policy, with President Milos Zeman leading the charge. He claims the cap “hurts most Czech citizens”.

Hampl defended it, calling it one of the main engines of growth and noting caustically that policy aims have a different “horizon than an election cycle”.

“Therefore it is worth recommending again, especially to market players, to pay more attention to inflation, CNB forecasts and its statements”, he said.

Weak inflation has analysts raising bets for a later exit from the policy. Consumer price inflation eased to a five-month low of 0.3% y/y in August, well behind the central bank’s 2% target. The current CNB forecast expects inflation will not reach the target until 2017.

Related Articles

Poland isolated again as it threatens to block EU declaration

Poland will not sign the Rome Declaration if its demands for moulding the EU’s future are not reflected in the document, Prime Minister Beata Szydlo threatened on March 23. The statement could ... more

EU asks CEE to comment on Russian gas promises

The European Commission has invited comments from Central & Eastern European states on proposals put forward by Russian gas giant Gazprom to meet competition concerns. Visegrad and the Baltic ... more

Poland struggles in bid to oust Tusk

The Polish government spent March 6 canvassing for support for its alternative candidate for the European Council presidency to compatriot Donald Tusk. However, it met little success, even in its own ... 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