MNI CNB Preview - Dec 2024: Time To Press Pause
Executive Summary:
- The CNB will likely press pause on its rate-cutting cycle.
- Several members indicated that an on-hold decision is on the table.
- The Board may prefer to err on the side of caution at this juncture.
Full preview including summary of sell-side views here:MNI CNB Preview - December 2024.pdf
Consensus has been converging towards the view that the Czech National Bank (CNB) will pause its rate-cutting cycle at the December meeting. Communications from several central bank members signalled that an on-hold decision is very much on the table as the two-week repo rate gets closer to its neutral level. In addition, the temporary flare-up in headline inflation towards the upper end of the +/- 1pp tolerance zone around the +2% Y/Y target coupled with the imminent seasonal repricing of goods and services in January warrant caution on the Bank Board’s part. With the two-week repo rate currently at 4.0%, within relatively close proximity to its estimated 3.0-3.5% neutral level, the Board feels less pressure to continue loosening policy at the previous pace.