CNB’s governor sees no need to raise the floor for
EUR/CZK, but confirms later exit from the current regime
Despite restricted temporary deviations, the Czech currency has been experiencing a period of very low volatility since the introduction of a quasi-fixed FX regime by the CNB in November 2013. That is why big attention has been to all comments by top Czech central bankers, in which a modification of the current status quo (targeting the EUR/CZK pair at above the 27.0 level) might be indicated. In this respect, yesterday’s interview of CNB’s governor Singer for Bloomberg supports our medium-term view that the exit from the existing monetary scheme will not happen before summer 2015. Governor Singer reiterated the CNB’s policy stance that the central bank would defend the EUR/CZK floor until the second quarter of the next year at least, which would then suggest that the first (repo) rate hike would come only afterwards. Importantly, Singer ruled out possibility that the CNB could easily hike the floor for the EUR/CZK to loose monetary conditions and boost inflation. The head of the CNB also praised recent ECB actions, which indirectly eased monetary conditions in the Czech economy.
Read the full report: FX Daily