Czech central bank (CNB) board’s statement following its monetary policy meeting on Thursday, December 21: At its meeting today, the Bank Board of the Czech National Bank left interest rates unchanged. The two-week repo rate thus remains at 0.50 percent, the discount rate at 0.05 percent and the Lombard rate at 1 percent.
Five members voted in favour of this decision. Two members voted for raising the two-week repo rate to 0.75 percent.
According to the current forecast, inflation will stay above the 2 percent target for most of 2018. It will then return to the target at the monetary policy horizon, i.e. in late 2018 and early 2019.
Following the November rise in interest rates, a continued increase in domestic market interest rates towards their assumed long-run level of 3 percent is consistent with the forecast. The rates are expected to approach this level at the end of 2019.
The Bank Board assessed the risks to the current inflation forecast as being balanced and insignificant.
In the fourth quarter so far, domestic inflation has been in the upper half of the tolerance band around the Czech National Bank’s 2 percent target. In October and November, the inflation forecast materialised in terms of both the recorded figures and their structure. Core inflation and food prices are still the biggest contributors to inflation.
The annual growth of the Czech economy accelerated further to 5 percent in the third quarter, also in line with the forecast.
All expenditure components contributed to the rise in domestic economic activity, in particular household consumption. Its continued robust increase reflects solid wage growth and ongoing employment growth.
A higher contribution of investment, especially in machinery and equipment, was also recorded. This may have a favourable effect on future productivity growth.
News & Views Underground 