Czech Inflation Slows Opening Door to Central Bank Forex Move
Czech inflation slowed to an annual pace of 1.0 percent in September marking a three-year-low, official data showed on Wednesday, and fuelling expectations the central bank could act to weaken the koruna.
Slower growth in the cost of food and falling fuel prices meant that consumer inflation fell from an 1.3-percent annual pace in August, the Czech Statistical Office said.
On a monthly basis, consumer prices fell by 0.4 percent in September, after an 0.2-percent drop in August.
Given lower inflation, the central bank (CNB) has said it could intervene on the forex market to weaken the koruna in a bid to give central Europe's third-biggest economy an export boost.
Such a move could also push inflation closer to the bank's long-term target of 2.0 percent by making imported goods more expensive.
As an economic stimulus, the CNB has already slashed its key lending rate to a record-low 0.05 percent -- among the lowest in Europe.
"After today's inflation data, the central bank is probably more likely to intervene on the forex market," said David Marek, an analyst with Prague-based investment bank Patria Finance.
"The central bank is facing a difficult dilemma -- on the one hand there are signs of economic recovery, on the other the risk of deflation is growing," Marek added.
The koruna slid to 25.57 per euro and 18.9 to the dollar after the data, from 25.51 and 18.76 at Tuesday's close, respectively.
Heavily dependent on car production and exports to the recovering eurozone, the EU member of 10.5 million people has recently emerged from a record 18-month recession.
The central bank expects Czech gross domestic product to grow by 2.1 percent in 2014, on the heels of a 1.5-percent contraction expected this year.
Source: Agence France Presse
| Copyright © 2012 Naharnet.com. All Rights Reserved. | https://www.naharnet.com/stories/en/101467 |