6th October 2016

CNB will not discontinue use of exchange rate as monetary policy instrument before 2017 Q2

A need to maintain expansionary monetary conditions at least to the current extent persists, the Bank Board of the Czech National Bank stated after its meeting on 29 September. The Bank Board therefore states that the CNB will not discontinue the use of the exchange rate as a monetary policy instrument before 2017 Q2. The Bank Board still considers it likely that the commitment will be discontinued in mid-2017. At the same time, the Bank Board stated again that any exchange rate appreciation following the discontinuation of the exchange rate commitment would be dampened, among other things, by hedging of exchange rate risk by exporters during the existence of the commitment, as well as by the closing of koruna positions by financial investors. In addition, the CNB will stand ready to intervene to mitigate exchange rate volatility. Read details in Czech and English.

The CNB board delivered a small surprise. It did not change the level of the FX commitment but prolonged its minimum duration until the end of 1Q17. The “hard” and “soft” commitments thus converged as the bank board did not change its view on the probable timing of the commitment., Komerční banka writes in its commentary (in English).

An article by the Hospodarske noviny daily mentions that businesses worry about the impact of weaker crown on employment.

Members of the American Chamber of Commerce in the Czech Republic