Transcript of the introductory statement from the press conference - 27 June 2013

GOVERNOR

I’ll proceed to what you already know from the first headline: we decided unanimously to leave the two-week repo rate at de facto technical zero. Furthermore, we are still emphasising that we will keep interest rates at technical zero over a longer horizon until we see a significant increase in inflation pressures. I believe this is a message you already know. You also know that we are ready to use foreign exchange interventions if further monetary policy easing becomes necessary. What is certainly new is that we agreed that the probability of commencing interventions is rising.

Consistent with the forecast is a decline in market interest rates, followed by a rise in rates in 2014. We see no increase in inflation pressures. We see no tangible risks of such an increase. The overall risks to the forecast are on the downside, tilted towards easier monetary conditions. This means not only that the situation may necessitate easier monetary conditions, but also that the risks are going further in this direction.

Moving to the current inflation forecast – as you know, this was a so-called “small” meeting between the forecasts – the current figures are below the forecast assumptions. As regards the external environment, the changes again go in the anti-inflationary direction. Consumer prices are lower. Producer prices are lower. Expected demand is lower. Maybe only the EURIBOR at the horizon of 2014 – but this is more a question of to what extent this consensus factors in the ECB’s latest communication, or rather it cannot really factor it in.

We cannot see any price pressures and pressures from commodities as signalled by Brent oil prices. The euro-dollar exchange rate is currently more or less where it was.

Turning to the Czech economy, it contracted more markedly than expected by the forecast. The April figures still indicate continued subdued activity. On the other hand, some signs of a slight economic recovery are emerging. Exports and orders will grow in the future. The components of GDP are looking better than the overall figure. There was a slight increase in consumer confidence, although I’d prefer to call it a stabilisation. The labour market was broadly flat. It seems that some signs of adjustment are visible, for instance, in a lower willingness of the labour force to accept shorter hours. Cost-push pressures – weakening ones – are apparent in agricultural producer prices only.

If I compare the recent developments with the forecast, the situation points again quite clearly in the anti-inflationary direction. GDP is lower. Inflation is lower. The average wage is lower. The share of unemployed persons is higher. I’d like to note that if we look at it more generally, we said at the last meeting with you that the risks to the forecast were on the downside. It seems that many of those risks have materialised.

The overall risks are tilted even more towards a need for easier monetary conditions in comparison with the forecast. The risk in this direction is of course largely due to lower domestic inflation. You might have noticed that risks in the opposite direction are missing from this slide, because we didn’t find any.