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CNB Rate Decision Steals Limelight In Czechia

CZECHIA
  • The Czech National Bank will announce its monetary policy decision at 13:30GMT/14:30CET, while a media briefing with Governor Ales Michl will follow at 14:45GMT/15:45CET. The meeting is "live" for a potential rate cut for the first time in months. Final data signals ahead of the meeting fell in line with the dovish trend, with Q3 GDP and S&P Global Manufacturing PMI undershooting expectations. However, official communications reflected the Bank Board's cautious approach, with officials refusing to commit to any specific outcome. Consensus is almost evenly split between a 25bp cut and a hold (11-10 in the Bloomberg poll), while the market is pricing a 25bp reduction in rates. We discussed the context of the decision in more detail in our usual preview.
  • E15 circulated two opinion pieces in the lead-up to today's CNB rate decision. Jaroslav Bukovsky discussed an unconventional view that an outsized 50bp cut could be on the cards. He referred to comments from Datarun economist Petr Barton, who argued that this would allow the Bank Board to pause at the December meeting, avoiding excessive financial market turmoil during the holiday period. By contrast, Martin Gurtler wrote that the CNB will likely wait with loosening monetary conditions until early next year, with some easing already delivered by significant koruna depreciation, which exceeded CNB staff forecast. Furthermore, the expected October rebound in inflation could create communication problems if rate cuts start today.
  • Czechia's YtD budget deficit widened to CZK210.7bn at the end of October from CZK180.7bn in September after four months of narrowing. Prime Minister Petr Fiala told reporters that budget fulfilment looks good and the government is on track to meet the full-year deficit target of CZK295bn.
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