MNI China Daily Summary: Wednesday, July 31

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MNI: PBOC Net Injects CNY185.57 Bln via OMO Wednesday

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MNI: EUROZONE JUL FLASH HICP +2.6% Y/Y

MNI: GERMANY JUL UE RATE (SA) 6.0% (FCST 5.9%); JUN 6.0%

France Flash Inflation Softer Than Expected

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

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Analyst Views Following Yesterday's CNB Decision (2/2)

CZECHIA
  • ING write that the risk of further rate hikes is low and FX interventions play a major role. Despite the rate forecast implying a 2W repo rate averaging 8.00% in Q4, the governor said the board prefers stability in interest rates. Despite the big changes in the CNB's forecast, nothing has changed in our view.
  • ING continue to see the risk of additional rate hikes as low and consider the hiking cycle to be closed. In the longer term, we believe the board is more open to cutting interest rates in the event of negative economic developments than the forward guidance picture provided by the CNB.
  • Goldman Sachs see the revised forecasts as surprisingly hawkish, implying the need for a significantly higher interest rate path. However, the Board emphasised the recessionary concerns surrounding the Czech economy as a key argument against further rate hikes.
  • We think that there is significant evidence that inflation expectations have become de-anchored, which we think will warrant further tightening, a risk that has also been acknowledged by the CNB in their press statements. We therefore maintain our terminal rate forecast of 8.00%.
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