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Czech Republic: Czech central bank keeps interest rates on hold

Thu, Nov 5 2009, 15:00 GMT
by Stanislava Pravdova

Danske Bank A/S


  • The Czech central bank (CNB) has left its key policy rate unchanged at 1.25%, in linewith consensus expectations. We had expected a further 25bp rate cut. The marketreaction was fairly strong with the Czech koruna firming around 0.7% and Czechrates up (the two-year swap rate is up 10bp).
  • The press conference scheduled for 15:30 CEST should provide more detail about the decision.
The decision to leave the key policy rate unchanged at 1.25% was in line with consensus, but against our expectation of a 25bp cut. We do not know the main reason behind the CNB’s decision to keep interest rates on hold, but think the recent correction in the Czech koruna (CZK) could have played a role. We think today’s decision is unlikely to have been unanimous and believe that some CNB board members probably advocated a further reduction in interest rates. At the press conference scheduled for later today, the new inflation and GDP forecasts will be revealed. In our view, GDP forecasts for 2009 and 2010 are very likely to be revised down.

We await the outcome of the press conference before coming to any conclusions on the future Czech interest rate outlook.


Published on  Thu, Nov 5 2009, 15:02 GMT

Danske Bank  | Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com

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