published: 06.02.2014, 13:51 | updated: 06.02.2014 14:33:41
Prague - The Bank Board of the Czech National Bank (CNB) today left interest rates at all-time lows again and decided to continue in forex interventions which aim to keep the crown near Kc27/EUR, the bank's spokesman Marek Petrus said.
The CNB has kept rates at record-low levels for over a year. The benchmark two-week repo rate is 0.05 percent.
The central bank launched interventions on November 7 in an effort to prevent deflation.
The CNB Bank Board repeated today it considers its exchange rate commitment one-sided in the sense that it will prevent excessive appreciation of the crown below Kc27/EUR by using interventions, that is by selling crown and buying foreign currency.
If the crown weakens above Kc27/EUR, the CNB will allow the exchange rate to float according to supply and demand on the foreign exchange market.
Six out the seven members of the CNB Bank Board attended the policy meeting today. Vice-governor Mojmir Hampl was not present at the meeting.
The press conference after the meeting will be held at 14:15.
The CNB launched forex interventions with the aim to ease monetary conditions and avert the threat of deflation. CNB governor Miroslav Singer said the bank's efforts to keep the crown near Kc27/EUR will last for at least a year and a half.
Analysts do not expect the centra bank to make any changes to the monetary police during 2014.
They believe the bank will not change interest rates or adjust forex interventions, and will only watch the crown's rate and see it stays near the Kc27/EUR level.
The first change to the monetary policy could be made at the beginning of next year at the earliest, according to analysts.
Forex interventions will preserve and create jobs and prevent bigger losses of gross domestic product that would occur if the economy slipped into deflation, the CNB said.
The interventions have been criticised by a number of economists and entrepreneurs, as well as by President Milos Zeman and his predecessor Vaclav Klaus. Both Zeman and Klaus said the Czech economy is not at risk of slipping into deflation.
By contrast, former prime minister Jiri Rusnok expressed support to the interventions. Rusnok was appointed member of the CNB Bank Board by Zeman on Wednesday.
Rusnok's six-year term of CNB Bank Board member starts on March 1. He will replace Eva Zamrazilova on the board.
CNB improves GDP estimate for this year and 2015
The Czech National Bank (CNB) in its new forecast improved GDP estimate for this year and 2015, it expects a 2.2 percent GDP growth in 2014 and a 2.8 percent GDP growth in 2015, according to documents made public by the central bank.
In its previous forecast from November, in the alternative scenario that includes forex interventions the CNB estimated a 2.1 percent GDP growth for this year and a 2.5 percent GDP growth for next year.
On the other hand, the CNB expects a worse figure for last year for which it has worsened its estimate from a 0.9 percent GDP fall to a 1.3 percent GDP fall.
The Czech Statistical Office (CSU) will make public is first GDP flash estimate on Friday, February 14.
According to the new forecast, inflation is to reach 2.8 percent in the first and second quarters of 2015. The previous estimate reckoned with a 3 percent inflation in the first quarter and a 2.9 percent inflation in the second quarter.
The Finance Ministry at the end of January also slightly improved its GDP estimate for this year and moderately worsened its estimate for last year. GDP should have contracted by 1.4 percent last year and should grow by 1.4 percent this year.
At end-October 2013, the ministry estimated a one percent fall for last year and a 1.3 percent growth for this year.
For 2015, the ministry counts on a 2 percent economic growth.
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