6 Nov 2008
At its meeting on 30 October 2008, the CNB Bank Board decided that the CNB would publish its forecast for the koruna-euro nominal exchange rate in numerical form (as a fan chart) starting from the first forecast in 2009.
This decision will make the CNB the only central bank in the world to publish a forecast for a nominal exchange rate vis-à-vis a specific currency (although a handful of the most advanced inflation-targeting central banks do currently publish effective exchange rate forecasts). The CNB will thus become a leader in communication openness and monetary policy transparency.
Until now, the CNB has disclosed its exchange rate forecast as a verbal description only. However, after assessing the CNB’s almost one-year experience of publishing the forecast-consistent interest rate path, the Bank Board took the view that a numerical forecast could be published for the exchange rate as well. As in the case of the interest rate path, it can be expected that the published exchange rate path will, with the aid of CNB communication, be correctly understood by the public as being conditional on the assumptions of the forecast and by the information available at the time it was prepared. New information obtained after the preparation of the forecast, along with factors not covered by the forecast, may cause the actual exchange rate to deviate from the forecast. As with the forecasts for other key variables, a fan chart will be used to describe this degree of uncertainty, which is generally high for the exchange rate.
The disclosure of the exchange rate forecast in numerical form will mean that full transparency of the CNB forecast will have been achieved. This will, in turn, enhance the transparency of the Bank Board’s monetary-policy considerations, giving external observers a better understanding of CNB monetary policy.