CNB Votes to Keep Interest Rate at 0.5% – Economists Forecast Rate Hikes in 2018

Prague, Dec 21 (CTK) – Five out of the seven members of the Czech National Bank (CNB) Bank Board voted in favour of no change in interest rates, with two members voting in favour raising the basic interest rate to 0.75 percent, CNB governor Jiri Rusnok told journalists after the board’s meeting.


The benchmark interest rate thus stayed at 0.5 percent.


“The majority opinion was that all indicators, with the exception of lower wage growth, are in harmony with the (CNB) forecast. The forecast is getting fulfilled very accurately and it says that there is no urgent need to raise interest rates at this moment,” Rusnok said.


Another argument in favour of keeping the rates unchanged was the fact that the next policy meeting is to take place in about six weeks. “At that time, we will have a complete set of new information and a new forecast based on them. So nothing dramatic will happen if we wait for this data,” Rusnok said.


The Bank Board raised rates last time at the beginning of November, by 0.25 points to 0.5 percent. It had also increased rates in August, which was the first rate hike since February 2008. The benchmark rate rose by 0.2 points then. In September, the board left rates unchanged.


Economists expect further rate hikes to take place next year.


The growth of domestic market interest rates towards the envisaged long-term level of 3 percent, which they should approach at the end of 2019, corresponds to the CNB’s latest forecast of further economic development, Rusnok said.


“The risks regarding further expected development of the economy were evaluated by the Banking Board as balanced and low,” Rusnok said.


As regards the Czech crown’s exchange rate, it is still slightly stronger than the CNB’s model estimates, Rusnok said.


Starting in February, the CNB will resume publishing its estimates of the crown’s exchange rate towards the euro, Rusnok added.