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CZECHIA: JP Morgan, ING Expect CNB to Cut Policy Rate by 25bps in August

CZECHIA
  • JP Morgan note that the latest inflation data is clearly benign and suggests the next CNB forecast could include lower guidance for mid-term rates. The currency has been weak but JPM think the downside surprises to inflation are way larger than the upside risks stemming from FX weakness. They add that the possibility of another 50bp cut in August is back on the table, but not the most likely outcome. For now they maintain their call for the pace of cuts shifting lower to 25bps in August.
  • ING say the lower-than-expected headline and core inflation have opened the door to further monetary policy easing. They add that the economy appears to be ready for a less restrictive monetary policy stance which leads them to revise their rate outlook downwards, with the year-end rate projected at 4%. They say the Board will likely decide between a 25bp and a 50bp reduction to the policy rate. At this stage, ING count on a 25bp cut, but will wait for guidance from decision makers in the coming weeks.
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  • JP Morgan note that the latest inflation data is clearly benign and suggests the next CNB forecast could include lower guidance for mid-term rates. The currency has been weak but JPM think the downside surprises to inflation are way larger than the upside risks stemming from FX weakness. They add that the possibility of another 50bp cut in August is back on the table, but not the most likely outcome. For now they maintain their call for the pace of cuts shifting lower to 25bps in August.
  • ING say the lower-than-expected headline and core inflation have opened the door to further monetary policy easing. They add that the economy appears to be ready for a less restrictive monetary policy stance which leads them to revise their rate outlook downwards, with the year-end rate projected at 4%. They say the Board will likely decide between a 25bp and a 50bp reduction to the policy rate. At this stage, ING count on a 25bp cut, but will wait for guidance from decision makers in the coming weeks.