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CNB Likely To Keep Rates Steady

CZECHIA

Executive Summary:

  • The CNB is likely to keep its benchmark rate steady at 7% on August 4, marking the first pause since the beginning of the tightening cycle in June 2021.
  • The ‘new’ CNB board seems to be keener on favouring FX interventions to support the koruna instead of rising rates as the economic outlook keeps deteriorating.
  • Median estimate is standing at 7.25%, with analysts’ consensus split between no change and a 25bps hike.

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CNB Preview Aug 4 - Final.pdf


The Czech National Bank is likely to keep its benchmark rate steady at 7% on August 4, marking the first pause since the beginning of the tightening cycle in June 2021. The ‘new’ CNB board seems to be keener on favouring FX interventions to support the koruna instead of rising rates as the economic outlook keeps deteriorating. Median estimate is standing at 7.25%, with analysts’ consensus split between no change and a 25bps hike.


CPI inflation continued to accelerate in June, coming up at 17.2%, slightly above expectations (17.1%) and up from 16% the previous month. Czech inflation is currently standing at its highest level since December 1993 and continues to be driven by the surge in food and energy prices. Even though the significant divergence from the CNB 3-percent upper tolerance band has been pressuring policymakers to intervene by hiking rates aggressively in the past year, inflation is likely to peak this summer (July/August at 20%) and therefore policymakers have started to increasingly attribute more attention to the growth component.


Source: Bloomberg/MNI

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