Bank Board Tweaks Forward Guidance, Says Upside Risks To Inflation Outlook Prevail

The CNB has now published the statement after the Bank Board meeting during which all members voted to keep interest rates unchanged and terminated its FX intervention regime.

• The Board dropped the phrase "the Czech National Bank will continue to prevent excessive fluctuations of the koruna" from the opening paragraphs of the statement. It has been replaced by the information about terminating the FX intervention regime, which was included in the initial press release.
• The statement notes that the baseline scenario of the new macroeconomic forecast assumes a "gradual decline in interest rates from 2023 Q3 onwards." However, the Bank Board guided that "expects interest rates to be higher than in the baseline scenario of the forecast in the coming quarters."
• Policymakers scrapped hawkish bias from its near-term forward guidance, getting rid of the phrase "will decide at its next meeting whether rates will remain unchanged or increase." Instead, it will now "base its decisions mainly on an assessment of newly available data and of the fulfilment of the forecast."
• The Bank Board "assessed the risks of the forecast and the uncertainties of the outlook as being significant and tilted to the upside" - a change from "both directions" at the previous meeting. The "threat of inflation expectations becoming unanchored and the related risk of a wage-price spiral" are seen as the main risks.
• Click here to see the full statement.