Czech Central Banker Says Negative Rates May Help End Koruna Cap

Policy makers in Prague may introduce negative interest rates to discourage inflows into the koruna around the time they are ending their three-year-old limit on the exchange rate, a policy maker said, Bloomberg News reported. As the Czech National Bank prepares to scrap its Swiss-style cap on the koruna next year, its main challenge is to avoid excessive currency gains that could choke nascent price growth and make the export-led economy less competitive. One way to dodge that risk is with a rate cut below zero from the current 0.05 percent that would make the koruna less attractive, board member Tomas Nidetzky said in an interview on Wednesday in London. “We will definitely not let the koruna appreciate too much,” he said. “We could use negative interest rates just to avoid speculation. It is a possible tool that we can use just for the process of the termination of the foreign-currency interventions.” Read more.