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GS on CNB, Expecting a 100bps Hike

CZECHIA
  • Reflecting the continued upward trend in inflation, significant CZK depreciation pressures, as well as an increasingly hawkish external environment, GS now expects the CNB to hike by 100bp to 6.75% (previously 6.50%).
  • GS view the risks as being skewed towards an (even) larger move.
  • Inflation in the Czech Republic, and elsewhere in the CEE-4 region, is showing no signs of slowing, with both non-core factors and underlying inflation pushing prices significantly higher, as evident in the large April and May inflation surprises.
  • This, combined with relatively weak exchange rate performance – which, to some degree, has been masked by significant FX interventions by the CNB – indicates the need for further significant tightening.

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