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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
CZECHIA
- Market prepares for CNB meeting next week (Nov 4), with policymakers likely to debate whether the central bank should hike by 50bps or 75bps.
- The CNB surprised the market at its last meeting (Sep 30) by raising the policy rate by 75bps (vs. 50bps exp.) to 1.5% to curb the rising inflationary pressures.
- As inflationary pressures are expected to remain elevated until at least the end of this year, participants continue to price in aggressive hikes in the coming meetings.
- FRA 2Mx5M is currently trading 107bps above the Pribor 3M, implying that the futures rate market is expecting the policy rate to be at 2.5% at year-end, which would then be the highest level since November 2008 (see chart).
- The market is also expecting the CNB to continue its tightening cycle through 2022 with the 3Mx6M FRA trading 125bps above the Pribor 3M.
- However, the government recently decided to reintroduce some restrictions amid rising Covid cases, which could lead to a significant downward revision in growth expectations.
- Therefore, can the CNB board continue to deliver an aggressive tightening cycle, running the risk of accelerating a downside scenario in the coming months?
Source: Bloomberg/MNI
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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