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CNB Enters Last Phase of Tightening Cycle

CZECHIA
  • CNB decided to proceed with a 75bps hike in yesterday's meeting (as expected), levitating the policy rate to 4.5%.
  • The policy rate is now standing above the 2008 high of 3.75%.
  • The CNB has now entered into the last phase of the tightening cycle, with the terminal rate expected to reach 5% (at most) in Q1/early Q2 before gradually decline from H2 2022 as inflationary pressures start to ease.
  • According to the CNB statement, 5 policymakers (out of 7) voted for rate hike in yesterday's meeting.
  • The CNB lifted its 2022 inflation forecast to 8.5% vs. 5.6% previously.
  • Governor Rusnok mentioned during the press conference that large hikes may not be needed in the future.

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