According to Lubomir Lizal, Board Member of the Czech National Bank, Czech rate setters may be forced to not only prolong their loose policy regime but to also ease monetary conditions further if pressures from the euro area continue to undercut inflation.
With the country’s fastest pace of economic growth in seven years failing to spur price growth, the Prague-based central bank is debating how long it will need to maintain its mix of near-zero interest rates and a cap on gains in the koruna. The bank has pledged to keep the koruna from appreciating past “around” 27 against the euro at least until next July, with some rate setters suggesting that it could extend to beyond 2016.
Lizal said he would start considering further easing if the bank’s forecast fails to show a credible path for reaching the inflation target on the policy horizon.
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