May 3, 2018 / 11:07 AM / a year ago

Czech central bank holds fire, market awaits new economic forecasts

PRAGUE, May 3 (Reuters) - The Czech National Bank kept its main interest rate unchanged on Thursday, as expected, as it seeks to balance a weaker crown against slower inflation than it had expected.

Governor Jiri Rusnok is due to comment on the decision and also present a quarterly update of the bank’s staff economic forecasts at a news conference scheduled for 2:15 pm (1215 GMT).

In a Reuters poll among economists, 13 respondents had predicted the two-week repo rate to stay at 0.75 percent, to which the central bank had raised it in February. One analyst saw a 25-basis point hike.

The central bank has lifted its main two-week repo rate in three steps since last August after nearly five years of ultra-loose policy of rates near zero combined with interventions against the Czech currency.

Eight analysts in the Reuters poll see the next tightening in the third quarter, including five that predict an expected 25-basis point move at an Aug. 2 meeting at which the next quarterly update to the macroeconomic outlook will be discussed.

That would be much sooner than currently expected by the central bank. The latest staff forecast projects the next hike at the turn of the year at the earliest.

Such a market expectation points to a weaker crown exchange rate than forecast by the bank so far. The currency outlook will be an important factor in the bank’s new forecasts on Thursday. (Reporting by Jan Lopatka and Robert Muller, editing by Jason Hovet)

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