PRAGUE, Dec 16 (Reuters) - The Czech central bank surprised
markets by delivering a 25 basis point cut on Wednesday, against
expectations in a Reuters poll of analysts but not a big
surprise for interest rate markets which had priced in a greater
chance of a cut.
The move brought the main two week repo rate <CZCBIR=ECI>
<CZRP=>, used to sterilize excess liquidity, to a record low of
1.0 percent, in line with the main euro zone rate.
The Lombard rate used for overnight lending to banks was
also cut by 25 basis points to 2.0 percent, but the discount
rate, paid for overnight bank deposits at the central bank, was
left unchanged at 0.25 percent, the bank said in a statement.
Following are analysts' and dealers' comments.
COMMENTARY:
PETR DUFEK, ANALYST, CSOB
"The development of the economy and the outlook including
inflation favoured lower rates.
"The crown maybe did not at times, but it is so volatile
that its daily fluctuations cannot be taken into account. I
assume central bank rates are at the bottom and now we will see
stability for most of the next year."
RADOMIR JAC, CHIEF ANALYST, GENERALI PPF ASSET MANAGEMENT
"Although a slight interest rate cut is still well in line
with implications that are coming from Czech National Bank's
quarterly forecast, for me it is quite surprising that somebody
from the camp of four board members, who were voting for stable
rates in early November, has changed his or her opinion now,
although both data releases and behaviour of the Czech crown
exchange rate were actually supportive for the decision to keep
interest rates stable.
"I believe that this was the last rate cut in current cycle
and that first interest rate hike will not come before mid-2010.
Still, today's decision is bit surprising when seen in context
of recently released data and growing risk aversion in financial
markets, as risk aversion and possibility of weaker crown were
the key reasons for keeping interest rates on hold in November."
DALIMIL VYSKOVSKY, INTEREST RATE TRADER, KOMERCNI BANKA
"It is a small surprise, but I don't see it as a significant
thing... I expect short rates to go down a bit."
"The previous vote was very tight, now its was probably
(board member Eva) Zamrazilova, I assume, who leant to a cut.
She made a statement of that kind recently."
MICHAL BROZKA, ANALYST, RAIFFEISENBANK
"Most of the market including us had predicted stability.
But this is in no way something out of the blue.
"The decision had been uncertain because the central bank's
forecast, which is consistent with lower rates, the previous
voting was narrow, and one member, who had originally voted for
stability, had acknowledged there was room for easing.
"The decision may be negative for the Czech crown, however
the development of the global markets is playing a more
significant role for the crown's rate than small changes to the
interest rate differential."
MARKET REACTION:
The crown weakened 0.6 percent to 26.275 per euro following
the move, from 26.103 before the decision but close to 26.265
late on Tuesday.
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>
