Koruna Snaps Losing Streak As CNB Members Play Down Dovish Market Bets

CNB speak remained front and centre today, drawing much attention ahead of the beginning of the central bank's blackout period on Thursday. EUR/CZK is on track to register its first intraday loss since July 14 and last operates -0.058 at 24.064. Bears look for a pullback below the psychological 24.00 figure, which ING described as the CNB's likely pain threshold.

• Bank Board members spoke in unison as they pushed back against overdone rate-cut bets pointing to over 100bp worth of rate cuts being delivered by the end of this year. They called these bets "too optimistic" (Prochazka) and "excessive" (Zamrazilova), with actual easing expected to be "slower than market pricing" (Frait).
• However, there were subtle differences in the messaging deployed by various policymakers. Jan Prochazka struck most hawkish notes, declaring that he "can't imagine" that the Bank Board could reach consensus to cut rates this year, with the panel set to decide "between a rate increase and stability" next week.
• By contrast, Jan Frait conceded that the CNB might be able to start discussing interest-rate cuts this autumn and said that rate hikes are now off his agenda, which could be formalised in the communique from next week's monetary policy meeting, by making forward guidance symmetrical.
• Zamrazilova chose a middle path, noting that she "can't imagine cutting rates until [she has] enough confidence that inflation is heading towards the +2% Y/Y target" in a sustainable manner. She was replying to a Twitter post suggesting that the market misinterpreted her comments last week, erring in the dovish direction.
• Comments from Bank Board members overshadowed an interview with Monetary Department Deputy Director Jakub Mateju, who said that inflation could reach the +2% Y/Y target as soon as in January. He noted that the Monetary Department is currently preparing an updated macroeconomic forecast for the Board.