MNI CNB WATCH: 25bps Cut Seen As Fine-Tuning Continues

MNI (LONDON) - The Czech National Bank is expected to cut the 2W repo rate by 25 basis points for a second successive meeting when it meets on Wednesday, taking it to 4.25%. (See MNI EM INTERVIEW: CNB To Cut 25bps-Singer)

Several Bank Board members have indicated their willingness to lower rates by another 25bp in September, and Deputy Governor Eva Zamrazilova has ruled out a return to 50bp cuts last seen in June. Analysts expect up to two further quarter-point cuts this year 

At 2.2% in July and August inflation came in slightly above the CNB’s summer forecast of 2.0% and 1.8%, respectively, albeit well within the +/- 1% tolerance band, and still on track to average 2.0% by year’s end. 

Consumer confidence surprised to the upside in September, adding 0.6 points to 97.9, while the business confidence indicator rose 3.8 points to 96.8, with sentiment in trade, industry and construction up on the previous month.

Czech Q2 GDP was slightly lower than expected at +0.3%, according to flash data, as the country continues to grapple with the knock-on effects of weak German demand. Wages, though still rising in real terms, do not appear to pose a significant upside inflation risk, while recent koruna strengthening has further curtailed upward price pressures.