MNI BRIEF: CNB June Minutes Highlight Wages, Currency Risk To Inflation

MNI (LONDON) - Five members of the Czech National Bank’s rate-setting committee voted for a 50 basis-point cut while two were in favour of lowering interest rates by 25bp given upside inflation risks, notably for wages, minutes of June’s Bank Board meeting showed on Monday.

The CNB lowered its benchmark two-week by half a point to 4.75%, a level seen as still “significantly restrictive.” However, governor Ales Michl said that at coming meetings the Board should discuss the option of slowing the decline in rates or stabilising policy for “some time,” with the fight against inflation “far from over.” (See MNI EM INTERVIEW: CNB Leaning Towards 50BP Cut - Ex-Governor Singer)

Jan Frait suggested that the koruna may be undervalued, making monetary conditions somewhat easier than desirable. Karina Kubelkova was concerned koruna weakness could be longer-lasting if Czech policy rates were to dip too far below those of the Fed, with Eva Zamrazilova also highlighting the risk of further currency depreciation.