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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CZECHIA
- We have seen that the CNB board has been very sensitive to rising inflationary pressures and decided to surprise the market with an aggressive 75bps hike at the previous meeting.
- Odds for another aggressive hike in November (i.e. 75bps) are still elevated given that inflationary pressures are expected to remain high until at least the end of the year.
- Forward rates are currently pricing in another 90/100bps hike for the rest of the year, which would levitate the policy rate up to 2.5%, its highest level since 2009 (see chart).
- However, we have seen that Czech government has recently implemented new Covid restrictions recently amid rising cases.
- As CEE governments have been constantly criticized over the poor management of the Coronavirus pandemic (last winter / spring), leaders will be more 'risk averse' this time to avoid losing popularity.
- New restrictions could continue to weigh on business and consumer sentiment indicators, which are currently standing at their lowest level since April 2021.
- Hence, with growth forecasts expected to be reviewed significantly to the downside, can the CNB board continue to deliver an aggressive tightening cycle, running the risk of accelerating a downside scenario in the coming months?
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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