Some good weather this year that helps food production may contribute to a substantial fall in inflation in emerging Europe, ING Barings said on Monday. "The sun can play a greater inflation-generating role than oil," ING said in a research note on cutting inflation in emerging Europe. "Interest rates are not always an effective tool to deal with inflation," it added.
The Czech central bank said on Monday it remained opposed to raising funding for the government through foreign bonds, saying such issues could put unwelcome upward pressure on the Czech currency. The Finance Ministry said it would follow the recommendation. The central bank fears the conversion of borrowing in foreign markets into korunas would add to the currency's firming and thus hurt the foreign trade balance and economic growth. Speculation that the government may tap foreign markets later this year followed growth in public deficits and rising volumes of domestic bonds. The government plans to raise at least CZK 58 billion (USD 1.5 billion) in bonds this year, CZK 56 billion in one-year treasury bills and further debt in shorter T-bills.
Spain unconditionally supports European Union enlargement and will seek that the Czech Republic is among the first newly admitted EU members, Spanish Premier Jose Maria Aznar told at a joint press conference with his Czech counterpart Milos Zeman today.
The Czech koruna closed local trading little changed on Monday after dipping to five-week lows earlier in the day. Late on Monday the koruna was trading at 34.88/91 to the euro from the morning level of 34.89/92, and from late Friday's 34.87/90. The currency was down at 37.50/53 to the dollar from the morning's 37.47/51 and 37.25/28 late on Friday.
Bonds continued to weaken. The longest state 6.95/16 bond fell 25 points from late Friday to 105.65/95, yielding 6.35/32 percent. The state 6.75/05 fell five points to 103.75/05, yielding 5.66/58 percent.
(David Marek)