Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Executive Summary:
- The CNB is likely to raise its benchmark rate by 100bps to 6.75% at its next meeting on June 22 to continue its ‘fight’ against inflation, which is expected to remain elevated longer than what policymakers previously estimated.
- Risks are being skewed towards a bigger hike, particularly following the Fed’s decision last week to accelerate the pace of its tightening cycle.
- This will be Rusnok last meeting as a Governor, following Ales Michl nomination as CNB’s new head (starting in July).
- The new board composition is perceived to be much more ‘dovish’ and therefore could start to weigh on the domestic currency in the medium term.
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The Czech National Bank is likely to raise its benchmark rate by 100bps to 6.75% at its next meeting on June 22 to continue its ‘fight’ against inflation, which is expected to remain elevated longer than what policymakers previously estimated. Risks are being skewed towards a bigger hike, particularly following the Fed’s decision last week to accelerate the pace of its tightening cycle. Market consensus is split between a 100bps and 125bps hike.
CPI inflation continued to surprise positively in May and accelerated to 16% YoY (vs. 15.5% exp.), its highest level since December 1993, up from 14.2% the previous month, mainly driven by the surge in food and energy prices. Figure 1 (left frame) shows that inflation has been diverging significantly from the CNB 3-percent upper tolerance band, which has been pressuring policymakers to keep a ‘hawkish’ stance. Inflation could reach 18% in the near term; sell-side analysts revised their year-end CPI forecast higher to 12.8% in recent weeks.
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.