Final Word from Tuesday, December 3, 2013

If someone, such as Pres. Miloš Zeman, wanted to make a political or legal issue out of the currency intervention on Nov. 7, the CNB itself is providing the ammo. Instead of continuing to be vague about why its action did not amount to a "change in the exchange-rate regime," which would require previous consultation with the cabinet, CNB Spokesman Marek Petruš declared today in HN that the bank did not devalue the crown. It merely began to use the exchange rate as another instrument for easing monetary policy, he said. There is no doubt that the CNB has the legal mandate to depreciate the crown by buying euros; the potential political or legal issue is whether it also had the legal mandate to take a vote - without prior government consultation - to set a maximum value for the currency. It is this semi-fixing of the crown that makes what the CNB did a devaluation by any reasonable definition of the word. [Czech Republic National Bank president ammunition]

Glossary of difficult words

ammo - ammunition; considerations that can be used to support one's case in debate;

a change in the exchange rate regime - prior consultation with the cabinet is needed under Par. 35 of the law on the CNB;

to ease - (in finance) to decrease in value or amount; (monetary easing) action by a central bank to reduce interest rates and boost money supply as a means to stimulate economic activity;

devaluation (Financial Times Lexicon) - official lowering by monetary authorities of the value of a country's currency in relationship to the currencies of one or more other countries.

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