The Czech koruna remained firm even after the nation’s central bank cut its key two-week repo rate to the record low. The central bank predicted that the economy will contract this year, but will return to growth next year.
The Czech National Bank lowered its main interest rate by 20 basis points to 0.05 percent. An interest rate cut was expected only by minority of the market analysts and and even they expected a decrease by just 0.1 percent or 0.15 percent.
The central bank explained its view on the performance of the Czech economy:
The Czech economy will fall by 0.9% this year as a result of a marked slowdown in external demand and subdued domestic demand. Next year, when a gradual recovery in external demand and restrictive impacts of domestic fiscal consolidation will act in the opposite direction, GDP will grow by 0.2%. Economic growth will accelerate to almost 2% in 2014.
The CNB added that “headline inflation will be slightly above” the bank’s target, while “monetary-policy relevant inflation will be in the lower half of the tolerance band”. The CNB also said that over the forecast period the koruna should be “roughly stable”. Indeed, the currency was stable, at least today.
USD/CZK was up a little from 19.4710 to 19.4716 and EUR/CZK fell from 25.2040 to 25.1990 as of 22:22 GMT today.
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