Czech Republic: Central Bank leaves interest rates unchanged, intervenes in foreign exchange market

At its 7 November monetary policy meeting, the Board of the Czech National Bank (CNB) unanimously voted to leave the two-week repo rate unchanged at 0.05%, a decision the markets had expected. The CNB has kept the two-week repo rate at this record low since November 2012. Moreover, the Board decided that the Central Bank would intervene in the foreign exchange market in order to further ease monetary policy. Market analysts were surprised, as they had not expected the Bank to take this decision as early as it did. The Bank stated that, with the intervention, it aims to weaken the Czech koruna against the euro at around CZK 27.0 per EUR. The Bank pointed out that, in addition to ultra-low interest rates, the foreign exchange rate intervention is an effective instrument to increase inflation and move it nearer to the Bank’s 2.0% target. The Bank reiterated its intention to intervene in the FX market, “in such volumes and for such duration as needed to reach the desired exchange rate level with the aim of hitting its inflation target in the future.”

Read more about Czech Monetary Policy.

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