Financial Market Inflation Expectations Decreased In May

The Czech National Bank's latest report on financial market inflation expectations, which aggregated responses from fifteen domestic and three foreign respondents, showed that inflation expectations among market participants have slightly decreased, while there has been more optimism about GDP growth outlook.

• "The analysts’ average one-year forecast (...) shifted downwards compared to the previous survey (by 0.3 percentage point to 3.2%). The three-year forecast also saw a slight decrease this time – down by 0.1 percentage point to 2.5%."
• "Unlike in the previous survey, one of the analysts is expecting key interest rates to be raised at the CNB's next monetary policy meeting. However, most of the respondents continue to expect rates to stay unchanged." The lone dissenter called for a 25bp rate hike at the next Bank Board meeting in June.
• Respondents "expect the koruna to remain close to its current levels in the weeks ahead but to depreciate less than assumed in the April survey at the one-year horizon." In addition, "the depreciation pressures include the narrowing interest rate differential and faster growth in the price level in the Czech Republic compared to the euro area."
• Click here to see the full report.