PRAGUE, Nov 5 (Reuters) - The Czech central bank kept
interest rates unchanged on Thursday, in line with a Reuters
poll of analysts but against the interest rate market which had
priced in a greater chance of a cut.
The decision left the main two week repo rate <CZCBIR=ECI>
<CZRP=> used to sterilise excess liquidity, at 1.25 percent.
Following are analysts' comments on the decision.
COMMENTARY:
PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT, PRAGUE
"It's in line with our expectations although the fact the
the market was split has sparked a logical reaction with the
crown strengthening. But it will not be some significant
reaction, rather a minor firming.
"Any piece of information that will arrive today will be
significant, whether they come up with something new or not,
because if they don't come up (with non-standard easing tools)
today, then they probably will not do it any more."
RADOMIR JAC, CHIEF ANALYST, GENERALI PPF ASSET MAMAGEMENT
"The Czech central bank decision most likely reflects
signals that global economy started to recover and to some
extent it might have been impacted also by recent weakening of
the Czech crown. Nevertheless, I assume that discussion whether
to stay on hold or whether to reduce interest rates was again
quite intensive and the decision to stay on hold was likely not
a unanimous one.
"I expect the news conference later today to indicate that
monetary policy may be still eased, if necessary. In any case,
the interest rate decision is positive for the Czech crown and
the CNB (central bank) board must be prepared for the scenario
that the crown may appreciate quite rapidly in the short term,
which would lead to tighter monetary conditions in the Czech
economy."
DALIMIL VYSKOVSKY, FIXED INCOME TRADER, KOMERCNI BANKA
"The swaps curve is a little bit higher... We are waiting
for what they say at the press conference, what the voting was
and the quarterly forecast. We will look for the three-month
PRIBOR forecast. That will be more crucial than the voting
itself."
MICHAL BROZKA, ANALYST, RAIFFEISENBANK
"Leaving rates unchanged could create upward pressure on the
crown. But a more significant strengthening will be prevented by
the possibility that rates could still be lowered in the near
future or that there could be an intervention against the crown."
VOJTECH BENDA, SENIOR ECONOMIST, ING WHOLESALE BANKING,
PRAGUE
"The statement at the news conference will be very
interesting. We expect both the GDP and inflation forecasts to
be cut."
"Markets are also watching if the central bank will
communicate some extraordinary measures apart from the standard
moves in interest rates, to get the interbank and bond markets
moving."
MARKET REACTION:
The crown currency firmed 0.7 percent against the euro
<EURCZK=> after the decision to 25.865, the highest level since
Oct 23.
For Czech money markets data click on <CZKVIEW>
For Czech money guide click on <CZK/1>
For Czech benchmark state bond prices click on <0#CZBMK=>
For Czech forward money market rates click on <CZKFRA>
