PRAGUE, May 7 (Reuters) - The Czech central bank cut
interest rates by 25 basis points to 1.5 percent on Thursday, in
line with a narrow majority of analysts' expectations.
The move sent the key two-week repo rate to a historic low
and pushed the Czech crown <EURCZK=> slightly weaker to 26.55
per euro. The bank has cut rates by 225 basis points since
starting its easing policy in August.
It did not immediately comment but was scheduled to hold a
news conference later on Thursday, where it will also present
new quarterly forecasts where analysts expect them to revise
downward their outlook for economic contraction in 2009.
The bank's current growth outlook is for a 0.3 percent drop
in gross domestic product for 2009.
Following are analysts' comments.
COMMENT:
SIMON QUIJANO EVANS, CHIEF ECONOMIST, CHEUVREUX
"I don't think it's a surprise. Obviously it's hit the Czech
crown, but the central bank has little other choice with
economic backdrop the way it is."
"There will not be massive (currency) appreciation through
the summer months given that central banks in the region are
going on the rate cutting cycle again."
MICHAL BROZKA, ANALYST, RAIFFEISENBANK
"It can be stated that the reason for the lowering is
decline in economy with only a low risk of not meeting the
inflation target."
"The cut was also possible thanks to stabilisation of the
Czech crown after a February plunge. We think the level of 1.5
percent is the bottom of this cycle and we do not expect a
change by the end of the year."
RAFFAELLA TENCONI, CHIEF ECONOMIST, WOOD & CO.
"It comes slightly earlier than anticipated but further
loosening was part of the plan."
"The big question is how low the GDP revision will be
because, if they go to around -2.5 percent, that's close to
consensus and would signal this is a one-off cut and we're
really staying stable from now on."
"If it's weaker, more in the region of a 3 percent
contraction... it might mean there are maybe a couple more rate
cuts in the pipeline, I would say in the next quarter."
DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
"It is a logical reaction to the present economic situation
and we cannot exclude another cut by 25 bps in the coming
months. After that, the rates probably should not go lower in
the Czech Republic."
DAVID NAVRATIL, ECONOMIST, CESKA SPORITELNA
"It could be expected due to the (economic) development. It
is well-timed because they definitely cut their (GDP) forecast
relatively significantly."
"Nevertheless we don't think there will be another series of
cuts and we did predict that if they are to do it, they would do
it now."
JAROMIR SINDEL, CHIEF ECONOMIST, CITIBANK, PRAGUE
"A significant revision of the Czech economic decline led
the board to this decision. Also, a stable crown currency that
stabilised on stronger positions compared to February and March
was also probably behind this decision."
"I think there is still room for further easing."
For Czech money markets data click on <CZKVIEW>
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For Czech forward money market rates click on <CZKFRA>
