Czech National Bank keeps interest rates on hold

The Czech National Bank’s Board kept the interest rates on hold today during its meeting. The central bank kept the repo rate at 0.05 percent, the discount rate at 0.05 percent and the Lombard rate at 0.25 percent. The central bank’s press release stated that the Board also decided to keep using the exchange rate as an additional instrument for loosening the monetary policy conditions.

The Board affirmed the Czech National Bank would intervene in the FX market, if required, to subdue the Czech koruna in a bid to keep the exchange rate of CZK against the euro close to 27.

The press release added that the exchange rate committee is one-sided. This signifies that the Czech National Bank might not permit the currency to strengthen to levels it would not be possible to interpret as “close to CZK 27/EUR”.

The Czech National Bank keeps the koruna from strengthening by selling CZK and purchasing foreign currency. The press release stated that if the “exchange rate departs from CZK 27/EUR on the weaker side, the CNB allows the koruna exchange rate to move according to supply and demand on the foreign exchange market”.