Czech central bank holds rates steady as hike clues awaited

PRAGUE: The Czech National Bank kept interest rates unchanged on Wednesday, as expected, with the market focused on any shifts in a policy outlook that points to the possible start of hikes this year, depending on COVID-19 developments.

All analysts in a Reuters poll this week forecast the main two-week repo rate to stay at 0.25%, where the central bank has kept it since last May following a series of cuts when the coronavirus pandemic started.

But expectations of a policy tightening this year have grown. All but one respondent in the poll this week saw at least one standard, 25 basis-point rate hike by the end of 2021.

Some central bankers have said tightening could come in the second half of the year when more information about the outlook for the export-driven economy - which is forecast to grow 2.2% this year after a sharp 5.6% drop in 2020 - and its key markets will be available.

Governor Jiri Rusnok and Vice-Governor Tomas Nidetzky will comment on the rate decision at a press conference at 3:45 p.m. (1445 GMT), where they will also present the central bank board's assessment of risks to its current macroeconomic forecast.

The central European country has been one of the worst-hit by the latest waves of the pandemic and the central bank has warned of risks to longer-than-expected restrictions on retail and restaurants.

But industry has remained open and government stimulus, including spending and an income tax cut, is expected to keep inflationary pressure up. The headline figure eased to 2.1% in February, just above the bank's 2% target.