Commerzbank expect eur/czk to head.......>

EURO-CZECH: Commerzbank expect eur/czk to head towards the Czk25.00 mark over

the coming quarters, according to their latest research report.

- It adds, Czech CPI data for the headline rate in December was in line with

market expectations at 2.4 percent y/y, but undershot CNB's own monthly forecast

of 2.5 percent y/y. CNB estimates that "monetary policy relevant" inflation

(which excludes tax changes) stood at a lower 2.3 percent in December, with

slower core inflation responsible for the downward surprise.

- Indeed, CNB economists summarised yesterday's data by stating that inflation

pressure remains pronounced, which reflects faster wage growth amidst robust

growth in the domestic economy; growth in domestic costs was expected to record

a further increase in the short-term owing to labour market tightness, after

which they are likely to moderate because of the stabilising effect of monetary

policy and koruna appreciation.

"In other words, the assessment is that monpol needs to get tighter before it

will have its desired effect." Commerzbank hold on to their base-case that the

central bank will raise the benchmark rate by 25 bps on Feb1," the report added.