Czech central bank keeps rates unchanged at 0.75 pct

The benchmark interest rate thus stays at an all-time low of 0.75 percent, at which it has been since the beginning of May 2010.

The policy meeting was attended by six out of the Bank Board´s seven members.  Their vote in favour of keeping rates flat was unanimous. CNB Vice-Governor Mojmir Hampl was the only member absent.

According to analysts, the CNB will keep rates unchanged for the whole of this year.

"Any change of rates would be very surprising. The environment in which the Czech economy finds itself at present can be almost considered deflationary. There are almost no demand pressures at present and they can be expected to be insignificant for the remainder of 2012. Weak domestic demand is underlined by fiscal restrictive steps of the current government, low wage growth and households´ fears of the future economic development," Akcenta analyst Miroslav Novak said.

Most analysts expect rates to remain unchanged for the rest of this year. Some of them even estimate that rates will remain stable until the end of 2013.

CSOB analyst Petr Dufek sees the current setting of interest rates as the best given higher inflation and a weak crown.

Economy has slowed markedly but no fall in recession followed, he said, adding that loans for businesses as well as mortgage loans are currently at the lowest interest rates.

Next Finance analyst Vladimir Pikora, in contrast, expects a rate fall over the euro zone crisis.

Raiffeisenbank analysts have the same scenario. "In the past two months, the economic outlook has developed slightly better than we feared, but it is still not very great. Our main scenario still reckons with the main interest rate standing at a level of 0.5 percent in the first half of 2012," Raiffeisenbank analyst Michal Brozka said.

Author: ČTK
www.ctk.cz