Czech National Bank discussing exit from the current FX intervention regime

Czech National Bank (CNB) has set a floor for the EUR/CZK at the 27.00 level. In an interview to the Czech economic daily, new CNB board member Tomas Nidetzky warned that a debate about koruna‘s exit scenarios has been on the table. Nidetzky said that CNB’s staff assessed several exit scenarios and their possible outcomes.

Nidetzky warned that it would be appropriate for the Czech central bank to leave the intervention regime only after it is certain that it would not soon need to do more (latter). He repeated that sustainable fulfillment of the inflation target (CNB’s macroeconomic forecast) was a pre-condition for a return to conventional monetary policy (in 2017).

ECB's extended quantitative easing policy until March 2017 (with a possibility of expansion) raises uncertainty about the announced timing of the departure. Interestingly, Nidetzky also added that he does not think that the impact of Brexit will be as dramatic as it seemed.

"We keep to anticipate an exit from the CNB FX regime in the second half of 2017, while we believe that it might happen anytime (day) – not just on scheduled monetary-policy meetings," said KBC Market Research in a client note.