The CNB Bank Board decided at its meeting today to lower the two-week repo rate by 25 basis points to a record low of 0.50%. Decision was at market expected (consensus Bloomberg, in line with 20 of 24 analyst). The Lombard rate was also lowered by 25 basis points to 1.50%. The discount rate remains unchanged at 0.25%. The new interest rate levels come into effect on 29th June 2012.
The CNB last eased monetary policy on 6 May 2010, when it lowered the repo rate by 25 basis points to 0.75 %.
The discount rate was left unchanged because some legal rules still use a multiple of the discount rate in sanction and similar provisions as a basis for calculating penalties, fines, sanction fees, etc. From the perspective of the spirit of the law the CNB deemed it justified to keep the sanction amounts above zero in such cases.
CZK/EUR (intraday chart online, decision at 1:00 p. m.):
A regular press conference will take place at 2.30 p. m.
Discount rate: A monetary policy rate which as a rule represents the floor for short-term money market interest rates. The CNB applies it to the excess liquidity which banks deposit with the CNB overnight under the deposit facility.
Lombard rate: A monetary policy interest rate which provides a ceiling for short-term interest rates on the money market. The CNB applies it to the liquidity which it provides to banks overnight under the lending facility.
Repo rate: The CNB’s key monetary policy rate, paid on commercial banks’ excess liquidity as withdrawn by the CNB in two-week repo tenders.