Central bank to extend weak crown policy | E15.cz

Central bank to extend weak crown policy

Česká národní banka
Česká národní banka
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ZDROJ: CC BY-SA 3.0: Jklamo via Wikimedia

Radek Pavlovič

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The board of the Czech National Bank (ČNB) has announced that it will extend its present currency intervention policy until at least mid-2016. It also repeated its guidance that in the case of strong long-term deflationary pressures, the ČNB would be prepared to adjust its current CZK 27 to the euro exchange rate cap.

Following the board’s meeting last Thursday, ČNB Governor Miroslav Singer declared that the likelihood that the bank would have to make such an adjustment – meaning another intervention to weaken a strong crown – had increased since the board last met in February. According to ČNB spokesperson Tomáš Zimmermann, the board is convinced that its exchange rate cap commitments will prevent the moving of the crown to a stronger level than CZK 27 to the euro. The continuing intervention is to be achieved by selling off crowns and buying up foreign currencies. Meanwhile, the board is keeping interest rates at historic lows of 0.05 percent.

The announcement of such a firm policy should in itself cause a market reaction, leading to a weakening of the crown, said Home Credit analyst Michal Kozub. In recent days, the crown has been experiencing a converse trend.

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