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CNB Board Majority Sees Terminal Rate Above 4%

CZECHIA
  • Even though a minority of CNB policymakers are likely to keep voting for rates to remain unchanged at coming meetings, the majority of the board is supporting more hikes to ease the inflationary pressures.
  • Governor Rusnok recently mentioned in an interview with Ekonom that it is 'hard to imagine' Czech rates above 5%, but confirmed earlier today (DenikN Interview) that he expects the policy rate to move above 4%.
  • CNB member Mora mentioned during an interview that Czech rates may reach 4.5%/4.75% in the first quarter of 2022. 5% is less likely according to the policymaker.
  • CNB policymaker Benda also mentioned in early January that the central bank may raise its policy rate near to 5% to continue its fight against inflation.
  • Ales Michl remains dovish and reiterated recently that he remains opposed to rate hikes. Michl and Dedek have been the most dovish policymakers in the past 6 months and voted for leaving interest rates unchanged at the latest meeting (December 22).
  • Tomas Holub recently mentioned that inflation may reach 10% in early 2022 before starting to gradually decline lower from the second quarter. He did not comment on CNB terminal rate, but confirmed that the central bank’s tools have been working. Raising rates reduce inflation through the CZK and the reduction of domestic demand. Hence, Holub is also likely to support more hikes in the coming meetings.
  • Next CNB meeting is scheduled for February 3rd and a 50bps hike seems likely, which would bring the policy rate up to 4.25%.

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