Koruna Loses Shine Amid Reflection On CPI Data

The initial reaction to expectation-beating May CPI outturn has proven fleeting and the koruna has reversed its earlier gains. EUR/CZK now changes hands +0.077 at CZK23.776 and bulls eye nearby resistance from May 19/Mar 28 highs of CZK23.797/23.820.

• The CNB confirmed in a statement that headline CPI at +11.1 Y/Y undershot its own forecast (+11.6%), while core inflation cooled to +8.6% Y/Y (CNB forecast: +9.1%). The central bank reaffirmed its expectation that inflation will ease to the target over the monetary policy horizon, i.e. 2Q/3Q2024.
• The initial reaction was driven by the fact that the inflation print topped consensus forecasts in Bloomberg & CTK surveys. It was also stronger than implied by last week's comments from CNB's Zamrazilova, who said it could be between +10%-11% Y/Y.
• Reuters have just circulated comments from CNB's Jan Kubicek, but the official largely reiterated his familiar views. He said that there is no need to raise interest rates at the moment, while cuts could start in 4Q2023 or in 2024.