IMF and OECD statements about interventions

19 Nov 2013

IMF and OECD provided the following statements about FX interventions:

“Fund advice, at the last Article IV Consultation, was that if a persistent and large undershooting of the inflation target is in prospect, FX interventions should be employed.  The current situation justifies the CNB’s action from that perspective.” - Mr. Masanori Yoshida, Mission Chief for Czech Republic, International Monetary Fund.

“The International Monetary Fund discussed the topic of FX interventions with the Czech National Bank during the 2013 Article IV Consultations which took place in May 2013, and was concluded on July 24. On August 2 the IMF issued a press release, in which it summarized the Executive Board’s assessment as follows: ‘If a persistent and large undershooting of the inflation target is in prospect, additional tools should be employed. Foreign exchange (FX) interventions would be an effective and appropriate tool to address deflationary risks in the context of inflation targeting framework. This is expected to quickly increase the price level and help increase inflation expectations toward the target. The operational aspects of possible FX interventions should pay due regard to transparency. This would allow the market to form expectations in accordance with the CNB’s inflation target.’ The IMF will continue its assessment of the CNB’s monetary policy at the occasion of the next Article IV Consultations to be held most probably in the summer of 2014.” - Mr. Johann Prader, the Executive Director representing Czech Republic in the Executive Board of the International Monetary Fund

„Low demandside pressures and decelerating food prices are containing inflation pressures in the near term. With interest rates technically at zero and excess liquidity in the banking sector, the National Bank has started foreign exchange interventions to prevent a long-term undershooting of the inflation target. Foreign exchange interventions should continue until inflation rises into the boundaries of the inflation target range and conventional monetary policy tools become effective again,“ - Organisation for Economic Co-operation and Development.

“In our opinion, such clearly expressed agreement of both major economic institutions eliminates concerns that the CNB’s step could be interpreted as the start of a ‘currency war’,” said CNB spokesman Marek Petruš.

Links to IMF's documents: