The Czech central bank has raised interest rates again to 1.25 percent far sooner than it had expected at the beginning of the year. It’s the fifth time the rate has been increased since the bank ended its currency intervention last year. This had been implemented in order to drive down the value of the Czech koruna and make it easier for exporters. Today, the central bank appears to be unnerved about the continuing weakness of the koruna, which fell to CZK 25.64 per euro on Thursday. iDNES.cz reports that fears over the development of the Eurozone are largely responsible for the situation along with concern over a potential trade war between the world’s largest countries. iDNES.cz quote the bank’s governor Jiří Rusnok as warning that yesterday’s increase needn’t be the last.
“We can’t rule out another step coming relatively soon,” he said. “If the current conditions continue, there’s room for it in the next currency/political meeting. The inflationary pressures in the Czech economy remain strong. They come primarily from tensions on the labor markets which are putting extremely strong pressure on the growth of wages. It’s lasting somewhat longer than we originally thought.”
