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CNB decided to leave rates unchanged at October sitting with 5-to-1 majority.

CNB decided to leave rates unchanged at October sitting with 5-to-1 majority. The Czech National Bank ( CNB ) Governing Board with majority of 5 against 1 vote decided to keep interest rates flat at 2.5% at its last monetary session at end-October, reports the national bank in Minutes of the Board. Central bankers agreed that as a factor in favour of stable rates were the favourable inflationary developments with the latest consumer price inflation data being lower than and close to the CNB target band thanks to oil prices standing at below their long-term average as well as the recently observed CZK strengthening. Central bankers have revised downwards the short-term inflation outlook due to lower expected growth in food and fuel prices, as well as the lower than expected impact on prices on part of the higher excise duty; still, board members were concerned about the future development of regulated prices which are expected to pick up in 2007, thus pulling inflation upwards to the upper boundary of the inflation target tolerance band at end-2007. The latter would possibly lead to gradual tightening of monetary policy, the minutes read. Furthermore, the Board discussed the new forecast, according to which the economic expansion is to decelerate from above 6% y/y in 2006 to 5% y/y in 2008 with the economic growth structure changing as the main driving force of GDP growth - net exports will be gradually replaced by accelerating households’ consumption being positively influenced by favourable labour market developments, consumer optimism and growing lending.

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