Bloomberg News

Czech Policy Makers Voted 5-2 to Leave Rates Unchanged Today

June 23, 2011

June 23 (Bloomberg) -- Czech policy makers voted 5-2 today to leave the benchmark two week repurchase rate at 0.75 percent for a 13th month.

The two votes were cast in favor of raising the rate by a quarter of a percentage point, Vice Governor Vladimir Tomsik said at a press conference in Prague today.

The Czech monetary authority has kept the main rate steady since May 2010 as central banks across Europe lifted borrowing costs to curb inflation. Poland increased its benchmark rate for a third month and the fourth time this year on June 8. Czech policy makers weigh differing signals from the economy as overall output growth and headline inflation accelerated, while government spending cuts continue to hinder domestic demand.

Inflation and the central bank’s monetary policy inflation rate are expected to remain close to the central bank’s targets, the central bank said today. The prognosis is consistent with short-term stability of market interest rates and a “gradual” rise beginning in the fourth quarter, the central bank said.

Risks are balanced to the central bank’s inflation forecast from the standpoint of its monetary-policy inflation target.

Main pro-inflation risks include faster inflation than expected, a decrease in anti-inflationary trends coming from the domestic economy and an increase in value-added taxes beginning in 2012.

Anti-inflationary risks include a lower outlook for interest rates abroad and debt problems in various eurozone countries, it said.

Today’s decision on rates was in line with forecasts of all 23 analysts in a Bloomberg survey.

--With assistance from Zoya Shilova in Moscow. Editors: Douglas Lytle, Alan Crosby

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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