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Jan Kubicek Flags Potential For CNB Rate Cuts In 4Q2023/Early 2024

CZECHIA
  • CNB's Jan Kubicek told E15 newspaper that the current level of interest rates is "adequate" and the central bank could start lowering them in Q4 or early next year, adding that he could vote for "gradual rate cuts" if he is confident that core inflation is easing toward the target. Still, Kubicek expressed support for holding rates steady for longer than the CNB's forecasting model suggests in order to "return back to a low-inflation mode." He poured cold water on concerns about heightened inflation expectations, arguing that falling consumption, rising household savings and a cooling mortgage market suggest that they are lower than commonly reported.
  • This comes after his hawkish colleague Tomas Holub yesterday warned that while inflation expectations have not significantly affected household consumption, their role in other parts of the economy should not be underestimated. In addition, Holub warned of a "partially materialising" wage-price spiral. Ceska Sporitelna wrote in their morning note today that he was "probably referring to, among other things, monthly statistics on the development of wages."
  • Czech Banking Association Chief Economist Jakub Seidler wrote in an op-ed for Hospodarske Noviny that the next CNB rate cut might not happen until 2024, arguing that recent below-forecast inflation data were less rosy than they appeared at the first sight. Seidler noted that cooling price pressures in some sectors of the economy are countered by persistent inflation in others.
  • Czechia's overall economic sentiment deteriorated to 1.4 in May from 4.8 prior, as business confidence fell to 6.9 from 10.1 while consumer confidence declined to -20.3 from -16.3, data from the CZSO showed. The statistics office commented that "households are significantly more worries about the deterioration of the overall economic situation and their own financial situation."
  • The CNB will publish data on changes to its balance sheet in the 10 days ended May 20.
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