PRAGUE, Sept 29 The Czech central bank kept its
monetary policy unchanged on Thursday as expected, keeping in
place a cap on the crown currency's exchange rate to help a
revival of price growth.
The bank gave no details but Governor Jiri Rusnok will
comment on the decision at a news conference at 2:15 p.m. (1215
GMT). The bank left its main interest rate
unchanged at 0.05 percent.
The bank will also present its outlook for an exit from its
pledge to keep the crown on the weak side of 27 per euro, which
it has so far predicted to be around mid-2017.
The timing is key because analysts believe the crown is
undervalued at the cap level. The currency is expected to firm
once the policy is dropped, although the bank has made clear it
would not allow the crown to strengthen sharply or reach levels
around 25.7 to the euro seen before the intervention regime
began in 2013.
A majority of analysts in a Reuters poll said the bank would
not make any changes on Thursday, in part because three out of
seven members were not present, and said they saw exit from the
intervention regime in the second half of 2017.
The bank has also given assurances that it would definitely
not scrap the policy before the beginning of 2017, although the
head of policy department Tomas Holub has said the board may
consider extending this "hard" commitment deeper into 2017 at
one of the coming meetings.
The board will debate a quarterly update of its economic
forecast on Nov. 3, which is when analysts see bigger chances
the bank could adjust the exit outlook.
Rusnok said earlier this month he believed the exit could
come after the July-August holidays next year, quashing
speculation in forward currency markets that solid economic
growth could prompt an earlier move.
The bank's most recent forecast, issued in August, saw
inflation accelerating to 2.2 percent in the third quarter next
year, just above the midpoint of the bank's target of 2 percent
+/- 1 percentage point.
The bank has said it would drop the exchange rate ceiling
only when it is sure inflation would sustainably meet the
The consumer price index (CPI) rose to 0.6 percent in August
from 0.5 percent in July, exactly matching the central bank's
As downside pressures on inflation prevailed in the past two
years, the bank has repeatedly postponed the expected end of its
cap on the crown exchange rate.
(Reporting by Jan Lopatka and Robert Muller)