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Jan Prochazka Says Market Pricing Has Become More Aligned With CNB's Communications

CZECHIA
  • CNB's Jan Prochazka told E15 that the market has corrected its pricing of the central bank's rate path after policymakers kept pointing to overdone rate-cut wagers. Prochazka noted that the market now sees just one cut towards the end of this year or at the beginning of 2024, which would be consistent with CNB communications. The official said that he "definitely" doesn't expect monetary easing to commence in September, as inflationary pressures remain "very strong" which calls for caution. However, the Bank Board will likely have a preliminary conversation about how to approach monetary policy normalisation at the September 27 meeting.
  • Yesterday's data showed that Czechia's inflation slowed to +8.5% Y/Y in August, in line with the CNB's forecast. Commenting on the details of the release, CSOB noted that the combination of sticky core inflation and elevated inflation expectations might be the reasons why the CNB remains cautious, even as weaker outturns for industry and construction could prompt the central bank to revise Czechia's growth outlook lower. CSOB expect the CNB to cut rates in Q4 by 50bp. Meanwhile, Ceska sporitelna see inflation between +2%-3% Y/Y in January and expect a rate cut in November.
  • Denik N reported that opposition parties are trying to persuade the government to change the structure of its fiscal consolidation package in last-minute negotiations. The opposition tabled over a hundred amendments, but most of them are not fiscally neutral, which means they will likely be rejected by the ruling coalition.
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