Posted by on Aug 6 2011. Filed under Business, The Daily .cz. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Czech central bank kept the interest rate low

The council of the Czech National Bank (CNB) decided that the base interest rate will remain at 0.75%. The decision is being welcomed by Czech industrial companies, which don’t want to pay higher interest on the loans they need to promote and finance their exports.

With this decision, the Czech government will not need to pay high interest to it’s creditors. However, this situation, aimed at helping Czech firms and the state budget, also implies that the bank’s management does not expect the Czech economy to recover anytime soon.

Furthermore, the Czech central bank’s strategy is in sharp contrast to the approach of the European Central Bank (ECB), which has increased the basic interest rate three times in the last ten months, out of fear of inflation. The current rate is 1.5%, which is two times higher than the Czech one.Inflatable Tent Dome best

Also, the Swiss and Japanese central banks cut their interest rates this week. Nevertheless, those countries are in different positions. The Japanese economy has to deal with the USA debts problem and Switzerland has a problem with the firming frank against the Euro and the US Dollar. An overly strong

currency is a problem for export-oriented countries.

What about the savers ?

A lesser interest rate is affecting savers badly. The low base interest rate is forcing banks to provide less interest to it’s customers – one percent a year. In this way, the savings of citizens are losing their value due to inflation. This year alone, they will probably lose one percent of their deposits, and next year, according to the estimate of the Czech central bank, they will lose two percent.xiao cheng

One of the effects of the low interest rates is that people stop saving. In 2008 and 2009, the amount of money deposited in banks by Czech citizens grew every year by CZK 150 billion. In 2010, it was only CZK 65 billion. In the first six months of 2011, deposits increased only by EUR 42 billion.

The higher rates keeps people saving, which also means that people are starting to borrow less.

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