MNI CNB Review - May 2024: Another 50bp Cut, More Hawkish Messaging
The Bank Board unanimously voted to cut interest rates by 50bp while the new staff forecast charted a higher interest-rate path.
Executive Summary:
- The CNB trimmed the policy rate by 50bp.
- There were no dissenters to the expected decision.
- Staff revised the interest-rate outlook notably higher.
There were no dissenters to the Bank Board’s decision to cut the two-week repo rate by 50bp to 5.25%, which added a hawkish flavour to the widely expected rate adjustment. The Bank Board persisted with familiar rhetoric, pointing to a number of pro-inflationary risks and reaffirming its “very cautious” approach to further monetary easing. The new forecast showed better GDP growth prospects and a slightly lower inflation path, but the focus was on the new 3-Month Pribor projection, which underwent a sharp upward revision. Governor Michl said that the Bank Board still expects the trajectory of rates to be higher than in the baseline scenario, albeit the gap between the Board’s expectations and the staff forecast has narrowed.