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Governor Broke Tie In Recent Vote On CCyB Rate, CNB's Prochazka Flags Work On New R* Estimate

CZECHIA
  • The Czech National Bank (CNB) released the minutes of the recent meeting on financial stability, which resulted in a 25bp cut to the countercyclical buffer (CCyB) rate. The document revealed that the decision followed a recommendation from the Financial Stability Department, which also said that "the results of quantitative methods gave room for a reduction of as much as 50bp." In an unusual turn of events, Governor Ales Michl had to exercise his tie-breaking power, joining Eva Zamrazilova and Jan Prochazka in backing a 25bp cut to the CCyB rate, while Karina Kubelkova, Jan Kubicek and Tomas Holub called for a 50bp cut and Jan Frait did not participate in the vote. The decision takes effect from April 1.
  • CNB's Jan Prochazka told CT that the CNB will likely manage to keep inflation within the target range this year, while the 2024 average CPI forecast of +2.6% Y/Y will likely be lowered after benign readings for January and February. Prochazka listed the familiar risks to the inflation outlook and noted that the policy rate is unlikely to end the year at 3.25%-3.50% which the market seems to expect. He added that CNB staff are currently working on a new neutral rate estimate but we need to wait until May to learn if it will be 3.5% or 4.0%.
  • Bloomberg ran a source report suggesting that Czechia's ammunition purchase scheme received a boost as Germany pledged a EUR300mn donation. Participating countries are aiming to source 800,000 rounds of artillery shells for Ukraine and Berlin's contribution may be sufficient to but around 180,000 of them. Still key questions remain about the timing of deliveries.
  • Moravian-Silesian Region Governor Jan Krkoska received a financial penalty after confessing to participating in a bribery scheme. Mlada fronta DNES reports that he has given up his post in regional government and in ANO after "deceiving" the party and failing to disclose his criminal charges. Note that Krkoska only took office last year, replacing rebel ANO official Ivo Vondrak who refused to back party leader Andrej Babis in the latest presidential election.
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