The Czech National Bank has cut its primary interest rate to just 0.05 percent, 75 bps below the Eurozone benchmark. Along with announcing that rates were likely to stay where they were for some time, it was revealed that the bank is also considering using other tools to increase the flow of money into the economy. Central bank governor Miroslav Singer said that the next step should be weakening of the Czech koruna.
“The bank will wait before restoring rates to above the technical-zero level until it sees significant inflationary pressures,” Bloomberg quotes Singer. Market interest rates should start to increase in 2014, according to the new National Bank’s forecast. The Czech crown weakened 0.5 percent against the euro following the rate announcement and traded at 25.134 koruna per euro. The National Bank’s forecast for 2012 GDP continues to call for a 0.9 percent contraction, while for 2013 the bank has cut its growth predictions from 0.8 percent to 0.2 percent.
