Central European Daily

A few words of a CNB board member Lubomír Lízal were enough to push the Czech koruna to a 4-1/2 year low yesterday. Mr. Lízal said that he did not perceive the scenario of changing the intervention floor from EUR/CZK 27 to 28 as dramatic or unrealistic. The reaction of the Czech currency was immediate and it weakened to EUR/CZK 27.38. It is also worth mentioning that the IMF as well as the OECD made a statement supporting CNB’s interventions. According to the IMF, a perspective of persistent and large undershooting of the inflation target justifies the CNB action. In other words neither IMF nor OECD perceives

devaluation of the koruna as a ‘currency war’. It is thus plausible that if macroeconomic data continue to surprise negatively (as did, for example, 2013Q3 GDP), the central bank will tend to weaken the koruna further.