Czech Inflationary Pressures are ‘Balanced,’ Minutes Show

Czech inflationary pressures are “balanced” and the appropriate response was to leave interest rates unchanged, according to minutes released from the central bank’s policy meeting on Feb. 2.

The bank’s board voted 6-0 at the meeting, with Vice Governor Mojmir Hampl absent, to leave the benchmark two-week repurchase rate at a record-low 0.75 percent for a 14th session.

“It was said repeatedly that inflation expectations were very well anchored and also that inflation expectations at the three-year horizon had fallen to a historical low of 2.1 percent,” according to the minutes published on the central bank’s website.

The bank reduced its forecast for economic growth in 2012 at the meeting to zero percent from 1.2 percent previously, less than the Finance Ministry’s Jan. 31 estimate of a 0.2 percent expansion. The new central bank outlook for gross domestic product next year was revised down to a 1.9 percent increase from 2.7 percent.

“The new forecast had absorbed a large part of the risks contained in the alternative scenario of the previous forecast, which had assumed stagnant economic activity in the euro area, and that there had been no reason to prepare an alternative scenario of the new forecast,” the minutes said. “However, it was also said that there was still considerable uncertainty going forward due to the external situation.”

To contact the reporter on this story: Douglas Lytle in Prague at dlytle@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net