Czech central bank slashes interest rates

The Czech central bank, Ceska Narodni Banka, has lowered the two-week repurchase rate to 2.25 percent which brings it down to its lowest level since August 2006 as the benchmark interest rate is reduced by half a percent.

This represents the third reduction so far this year amid concerns that the economy will slow greater than expected with the recession seemingly hanging over Western Europe and the country’s main trading partners which have dented exports.

The car industry has been hardest hit and an industry group announced that manufacturers and Czech suppliers are likely to cut 13,000 jobs.

Following the tightening grip of the global financial crisis the demand for exports have fallen whilst inflation has slowed, which has meant that the central bank has been rallied into action in order to cut rates.

This latest reduction was a response to last week’s reduction by the European Central Bank, as well as Slovakia who reduced rates prior to their accession into the EU on the 1st January.

The koruna remained lower than the euro after the rate announcement at 26.388.

The inflation rate was at 4.4 percent during last month and is higher than the central bank’s target rate of 3 percent. However the bank has recently stated that they believe inflation will return to target as commodity and food prices fall.

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