BOC SAYS DOESN'T NEED TO ALTER PATH OF QT RIGHT NOW

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Analyst Views Following Yesterday’s CNB Decision (1/2)

CZECHIA
  • Natwest write that the forecasting round shows that the Bank's internal economists disagree with the Board's decision to keep rates unchanged. They believe the bank's success in FX intervention means it will increasingly use the policy to foster higher levels of CZK vs EUR, to press down on imported inflation.
  • JP Morgan see CNB modelling as having lost importance since the board reshuffle, and so markets should put more weight on the words, rather than the numbers, coming out of the CNB. The majority of the board justifies deviating with the forecast with the fact that long term rates had gone up and with the cryptic argument that the CNB “needs to be a firm anchor stabilising conditions in the economy”.
  • JPM see the worded message as quite straightforward - the CNB will not hike rates further absent a major shake-up in the outlook, major acceleration in CPI, collapse in Koruna etc. Small tribulations will be addressed via FX interventions, which, given the size of FX reserves, are quite a credible strategy in the CNB’s case. We expect rates to stay flat at 7% until at least 2H23.
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