The Czech central bank (CNB) lowered its inflation forecast and raised growth estimates but left interest rates unchanged on Thursday despite weaker price pressures and discussing the possibility of a rate cut. The CNB cut its end 2001 net inflation forecast to 2.5 percent from a previous 2.8 percent, year-on-year, in the lower half of its 2.0-4.0 target. Vice-governor Ludek Niedermayer also noted that the forecast for net inflation growth of 3.2 percent at the end of 2002 came up during the discussion.
The Czech government said it may have to pay between CZK 50 billion ($1.3 billion) and CZK 100 billion to cover non-performing assets of failed Investicni a Postovni Banka AS. The payment would meet guarantees against risky assets that the government made when the central bank sold the bank to CSOB. Interim results of two separate audits ordered by the government and the bank have identified as much as CZK 180 billion of IPB's estimated CZK 300 koruna in assets as under some kind of risk.
The Czech koruna continued its firming trend against the euro on Thursday, following the euro's afternoon rally against the dollar. Late on Thursday the koruna was trading at 34.84/87 to the euro from the morning's 34.87/89 and from 34.94/97 late Wednesday. Koruna/dollar stood at 37.95/96 from the morning's 37.81/84 and 37.83/86 late Wednesday.
The longest state 6.40/10 rose 40 basis points from late Wednesday to 97.30/60, yielding 6.80/75 percent. The state 6.57/05 was up 10 basis points at 101.45/75, yielding 6.33/24 percent.