February 03, 2023 12:20 GMT
MNI CNB Review - February 2023: Higher For Longer
The CNB left interest rates and the existing FX regime unchanged while signalling that monetary policy settings may remain relatively tight for longer than priced by money markets.
- The Czech National Bank left interest rates and the FX stability commitment unchanged, in line with expectations
- The central bank’s communications suggested that the exchange-rate channel is still seen as a key bulwark against inflation
- Governor Ales Michl explicitly pushed back against market pricing and suggested that interest rates may need to remain higher for longer
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The Czech National Bank voted 5-2 to leave the 2-week repo rate unchanged at 7.00% and maintain the existing FX regime, in line with the consensus call. The two dissenters (presumably Mora and Holub, based on past decisions) were seeking a 50bp rate hike. While the “dovish” majority outvoted them yet again, Governor Michl suggested that monetary policy settings may have to remain relatively tight for an extended period of time, with the CNB determined to get on top of inflation.
Fig. 1: Comparison of CNB Forecasts - Autumn 2022 versus Winter 2023
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