The koruna weakened as Czech inflation stayed below the central bank’s target for a third month, fueling speculation on whether policy makers will try to stimulate the economy by weakening the currency.
One year after the death of former Czech President Vaclav Havel, a global icon in fighting dictatorship, his persecutors’ political heirs have national power in their sight for the first time since 1989.
The Czech central bank damped expectations it will sell the currency for the first time in a decade to battle a recession after policy makers kept interest rates at effectively zero for a second meeting.
The Czech economy shrank for a third consecutive three-month period from July to September, one quarter short of matching the longest decline on record as government austerity measures damped domestic demand.
The Czech central bank board voted 4- 3 today to leave the benchmark interest rate at a record low, showing the debate on the timing of policy tightening is intensifying as inflation and an economic recovery gather pace.
The Czech government’s funding costs fell to an all-time low for the fifth consecutive bond auction as the koruna’s appreciation to the strongest in four months added to expectations for interest-rate cuts to zero.