Czech National Bank not yet out of options

The Czech National Bank is likely to cut interest rates to a fresh record low later this week. But it is quickly running out of room for conventional policy responses to lift the economy out of recession. And with activity set to remain subdued on the back of deepening problems in the euro-zone, we think the Bank will ultimately turn to unconventional measures. These are likely to include limiting the scale of its current sterilisation operations and FX intervention to weaken the koruna.