To counter the economic impact of the coronavirus, the Czech National Bank has twice this month cut interest rates, which now stand at 1 percent. But it has balked at quantitative easing – even though central bank governor Jiří Rusnok says the most pessimistic economic forecasts are the most realistic.
The government aims to fast-track legislation to untie the Czech central
bank’s hands to be active in the bond market. But Prime Minister Andrej
Babiš (ANO) told MPs on Tuesday that does not mean any immediate
The Finance Ministry said in a document accompanying the bill that the government was just fast-tracking, as part of its response to the coronavirus pandemic, Reuters reported.
The amendment widening the central bank’s powers to buy securities on the market does not alter a ban on monetary financing nor allow the central bank to enter the primary government debt market.
The Finance Ministry plans to issue government bonds worth 33 billion crowns in April. As of December, it had planned to issue medium- and long-term bonds worth at least 120 billion crowns on the domestic market in 2020.
ING’s latest economic and financial analysis on the economic costs of Covid-19 predicts the Czech Republic will show negative GDP for full-year 2020. The volatility of the Czech crown will remain “extra elevated”, it says, given the positioning-related moves in the currency and the risk of central bank interventions.
The Czech government and central bank have announced further measures to offset the impact of the coronavirus on large firms, small businesses and households. While economic growth is certain to drop steeply in the near term, the authorities and experts note this country is better prepared than most to weather the storm.
The Bank Board of the Czech National Bank has adopted measures to mitigate
the impacts of the coronavirus epidemic on Czech firms, businesses and
At its monetary policy meeting on Monday, the Bank Board lowered the two-week repo rate by 50 basis points to 1.75%.
At the same time, it lowered the Lombard rate to 2.75% and the discount rate to 0.75%. The vote was unanimous.
The change in rates takes effect on Tuesday, March 17, 2020.
In addition, the Bank Board declared that it was ready to cut interest rates further should the economic situation so require.