Czech National Bank sees inflation approaching target level, cuts repo rate: minutes report

By Richard Connell

New York, May 15 - The board of the Czech National Bank, seeing inflation reaching the inflation target of 2% during 2010, reduced the bank's repo rate by 25 basis points to 1½% at its meeting on April 7, according to minutes released by the bank.

The board looked at the global financial crisis and the negative effect it is having on the Czech economy, reflected in lower GDP, slower wage growth and rising unemployment.

The board closely examined recent data which showed inflation falling below the inflation target towards the lower boundary of the tolerance band.

Forecasting that domestic activity would fall by 2.4% this year, the board concluded that inflation would continue to fall in 2009, but would begin to edge up again to reach the target level of 2% by the end of 2010.

While some members of the board noted that they thought the largest part of the "adverse shock" had already hit the economy, others noted risks involved in any recovery, including the future of the koruna exchange rate and the potential of a longer-lasting recession abroad.

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