HSBC Expect Just 25bp Cut Next Week

HSBC see the Czech National Bank cutting rates by just 25bp next week despite recent dovish communications but have pencilled in 50bp cuts in March and August, while noting that risks are tilted towards deeper cuts.

• They cite comments from Jan Frait and Tomas Holub, who expressed preference for outsize cuts, while noting that it remains unclear if these remarks represent the majority view on the Bank Board.
• HSBC argue that the majority will likely be ready to step up the pace of monetary easing only in March, on the back of January and February CPI prints. In their view, potential downside surprises to core CPI will be key to the pace of easing.
• They note that "weak growth and stagnant domestic demand pushing inflation sustainably below the +2% Y/Y target might argue not only for a faster pace of easing but also a lower terminal rate," while CZK weakness could moderate the pace of cuts.