MNI CNB WATCH: Policy Hold Seen, Cuts To Start In Q1 2025
MNI (LONDON) - The Czech National Bank is expected to pause its easing cycle when it meets on Thursday, with inflation edging closer to the target level’s upper bound and the 2W repo rate - currently at 4.0% - closing in on neutral. (See MNI EM INTERVIEW: CNB To Hold, Cut From February - Ex-Official)
After August's announcement that the Bank Board had moved to “fine-tuning,” Governor Ales Michl indicated earlier this month that a pause was likely to be under discussion at the Dec 19 meeting.
Board member Jan Kubícek has indicated his preference for a policy hold, while Deputy Governor Jan Frait and Karina Kubelkova suggested they would have to decide between a 25BP cut and no change.
Meanwhile, Deputy Governor Eva Zamrazilova - who cast a lone vote in favour of a pause in November - again backed leaving rates unchanged in comments to MNI. Hers may well be the majority view this time around. (See MNI EM INTERVIEW: Czech National Bank May Hold In Dec-Zamrazilova)
Wage growth exceeded central bank expectations in 2024, while services inflation remains elevated. But a struggling economy, weak foreign demand - especially from Germany - and a background of ECB cuts pushing the koruna higher means a return to quarter-point cuts following the first rate-setting meeting of 2025, in February, would be no surprise.