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China Repo Rates Diverge Friday

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  • Yesterday, the CNB raised its benchmark rate by 25bps as expected to 0.5%. Four member voted for a 25bps increase, one for 50bps hike and two members voted for leaving rates unchanged.
  • CNB Chief Rusnok mentioned in a press conference in Prague (following CNB decision) that it is possible that the Czech central bank will raise interest rates at every coming meetings, but hopes the CNB will not have to do so, implying that the CNB could hike by another 2 to 3 times in 2021 (original forecast was 3 hikes in 2021).
  • With the Czech FRA 6Mx9M trading at 87bps above the Pribor 3M, the market is currently pricing 3 to 4 hikes in H2 2021 (up to one hike at every meeting).
  • This morning, Business and Consumer confidence rose to 13 in June (from 8.4 the previous month), implying that sentiment continues to remain positive in Czech Republic ahead of the summer.