Czech National Bank Maintains Rate at 0.75%

The Ceska Narodni Banka held the two-week repurchase rate at 0.75% as expected, and kept the discount rate unchanged at 0.25% and Lombard rate at 1.75%.  The Bank said: "As regards the reasons for the decision, monetary-policy relevant inflation is slightly below the inflation target over the entire forecast horizon. Even headline inflation, which, as you know, is subject to an escape clause, and which, I assume you also know, will rise because of a VAT increase in 2012, will stay within the interval, i.e. it will remain below 3% and will, in our view, fall below the target in our opinion in early 2013. Consistent with the forecast is a slight decline in market interest rates and flat rates until late 2012/early 2013."

The Czech central bank also kept the repurchase rate unchanged at its September meeting this year; its last change was a 25 basis point cut in May 2010.  The Czech Republic reported annual inflation of 1.8% in September, compared to 1.7% in August and July, 1.8% in June, 2% in May, 1.6% in April, and 1.7% in March this year, and within the Bank's official inflation target of 2%.  

The Czech economy expanded 0.1% in Q2 (0.9% in Q1) this year, placing annual GDP growth at 2.2% (2.8% in Q1).  The Czech Republic's currency, the Koruna (CZK) has gained about 3% against the US dollar this year, and the USDCZK exchange rate last traded around 18.14

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