Czech National Bank Keep Interest Rates on Hold by 6 Votes to 1

The board of the Czech National Bank (ČNB) on Wednesday voted to keep interest rates at their current level. Despite the spike last month, inflation is expected to be within the 2% tolerance band. 6 board members backed this while one voted to raise rates by 0.25 basis points. Photo credit: Zenon Moreau.

Brno, Jul 1 (BD) – Jiří Rusnok, the bank Governor, explained at a press conference their reasoning and how they see the next few months.

Last month’s upturn in inflation was attributed mainly to seasonal food factors and the bank expects the rate to return to the 2% level in Q1 2020. Therefore they don’t see this as a reason to increase interest rates.

Economic growth is expected to remain at around the 2.5% level for the rest of the year and then edge up towards 3% in the first quarter of next year. This was broadly in line with expectations although the level of household and government consumption rose faster than expected.

The labour market remains tight with the number of vacancies falling in the first quarter and wages rising slightly faster than expected.

The Czech crown averaged 25.7 crowns to the Euro, which was weaker than expected by 0.20 CZK. However, the bank forecasts the crown to strengthen and reach the 25 crown to the euro level in early 2020.

All in all, the outlook into the middle of 2020 looks reasonably stable and reinforces the bank’s expectation that interest rates will remain stable until mid-2020.

The bank sees the main threats to this picture as coming from protectionist tendencies in world trade, continuing slow growth in the eurozone and the future development of the Czech crown.

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