CNB Board Meeting of 25 February 1999

At its meeting today, the Czech National Bank Board assessed the latest economic and monetary developments. The Board stated that in recent months, there had been a change in the internal and external conditions of economic development, including a significant correction of the external imbalance. The significant lowering of interest rates along with the weakening of the koruna exchange rate was creating, from the point of view of monetary conditions, favourable prerequisites for overcoming the economic recession. However, at the same time, the effect of factors which in the past had worked towards the correction of imbalances, particularly the development of wages and public finance, was weakening.

In the wage area, excessive average nominal wage growth and marked wage "inertia" were being sustained, which was not consistent with the significant decline of economic output, labour productivity and inflation. It was being confirmed that in wage bargaining, wage growth had taken priority over sustaining employment levels.

The Bank Board decided to leave the CNB's interest rates unchanged at the current level.

A further Bank Board discussion on the monetary issue is expected on 11 March 1999.

CNB - M. Švehla