August 08, 2022 06:22 GMT
- CNB hiking cycle has most likely peaked. The Governor and the board’s majority preference to stay on hold is obvious.
- Two months ago this preference would look out of touch, but the macro picture has rotated sufficiently that JPM believes there is indeed a macro case to stay on hold.
- The only potential challenge comes from financial markets: in a context of energy supply uncertainty, risk aversion towards EM could trigger severe FX weakness in CEE.
- This is the main reason JPM still had some marginal additional hikes in the forecast.
- Yet, neither is the CNB as averse to selling large chunks of FX to defend the Crown as JPM thought, nor is the market as keen to challenge the central bank.
- In conclusion, the central bank’s preference to keep rates on hold appears consistent with the macro background and is likely to get limited challenge from financial markets.
- JPM therefore now sees 7% as the peak in this hiking cycle, with rates on hold until late into 2023.