The Bank Board of the Czech National Bank at its meeting today decided unanimously to leave interest rates unchanged, ie technical zero. The Board decided to continue to use the exchange rate as an additional tool easing of monetary conditions. Yet confirmed the commitment of the Czech National Bank to intervene if necessary on the foreign exchange market to weaken the exchange rate to maintain the exchange rate against the euro near the level of 27 crowns per euro. The Czech National Bank is in line with that still ready to automatically perform time and volume unlimited intervention. The asymmetric nature of the exchange rate commitment remains unchanged.
This decision is based on the new macroeconomic forecast. It envisages using the exchange rate as an instrument of monetary policy by the middle of 2017. Inflation is starting to rise, however, still significantly below two percent objective of the Czech National Bank. According to the forecast, inflation will continue to increase and the monetary policy horizon slightly exceeds two percent target. To it will then return over 2018 above. Sustainable fulfillment of objectives, which is a prerequisite for a return to normal monetary policy, and according to the new forecast will be starting from mid next year.
The need to keep monetary conditions loose, at least at their current level persists. The Board therefore reiterates that the Czech National Bank does not stop using the exchange rate as an instrument of monetary policy sooner than in the second quarter of 2017. The Board while continuing to see as the likely end of the commitment in mid-2017.