15th July 2016

Czech National Bank/Bloomberg: Koruna on Course to Exit Cap in 2017, New Czech Rate Setter Says

The Czech economic outlook indicates the central bank will be able to end its cap limiting koruna gains in about a year, and policy makers probably won’t have to pursue more unconventional monetary steps, a new member of the rate- setting board said in an interview published by the Czech National Bank.

Domestic demand is fueling an economic expansion, with an improving labor market and “brisk wage growth” boosting household consumption, Vojtech Benda, who joined the panel on July 1, said in an interview in Prague on Friday. The U.K. vote to leave the European Union is a source of uncertainty, but it shouldn’t have a significant impact on the Czech economy in the bank’s 18-month monetary policy horizon, he said.

The bank board has discussed several times in the past year whether or not to join some global central banks by imposing negative rates to create additional stimulus. Benda said there was only “very limited potential” for sub-zero interest rates to ease monetary conditions, adding that the exchange rate is a far more efficient measure.

Read full version of the interview (in English). Another interview with Mr Benda in Czech is available here.

Click also on an interview with Generali Investments expert Radomír Jáč for Radio Zet saying that after Brexit, the Czech National Bank will not be too eager to exit the fixed exchange rate regime.

Members of the American Chamber of Commerce in the Czech Republic