Czech central bank to keep koruna weak until 2016

Jiří Hovorka Tereza Holanová ČTK Jiří Hovorka, Tereza Holanová, ČTK, Ivan Eckhardt
1. 8. 2014 16:50
Czech National Bank announces it will keep exchange rate of koruna at record low level until 2016. Previously, central bank said its currency interventions would continue only until January 2015
Czech National Bank
Czech National Bank | Foto: Reuters

Prague - The Czech National Bank (CNB) will keep the koruna weak for much longer than initially announced. The koruna will not strengthen before 2016, the CNB said. Originally, the central bank announced that the currency interventions would continue only until January 2015.

“The bank board announces that the CNB will not stop using the exchange rate as a monetary policy instrument before the year 2016,” said CNB spokesman Tomas Zimmermann.

Experts previously surveyed by Aktualne.cz estimated that the measure would be dropped in the summer of 2015.

Central bank: Weaker currency will boost consumption

The CNB's announcement shows that the end of the interventions will be gradual, said David Navratil, an economist at the Ceska Sporitelna bank.

“In other words, one day the CNB will say that the exit has begun, but after that it will mitigate the strengthening of the koruna for roughly six months. And only after these six months will the CNB leave the exchange rate alone, which means to stop using the exchange rate as a monetary instrument. In other words, the exit may start 'as early as' in the fall of 2015,” said Navratil.

“The Czech National Bank does not want to go through that trouble and intervene again, so it will wait until the inflation rate is safely above 2 percent,” said Raiffeisenbank economist Helena Horska.

The Czech economic growth shows that the central bank's intervention was justified, says CNB governor Miroslav Singer.

The CNB has also said that it will keep Czech interest rates at record low levels of 0.05 percent (the two week repo rate and the discount rate) and 0.25 percent (the lombard rate).

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Zdroj: ČTK
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