Senior Staffer Says Inflation Should Ease To +2% Y/Y In Jan, Work On New Forecast Is Underway

Deputy Director of the CNB's Monetary Department Jakub Mateju told Newstream that "if there are no surprises, and so far it seems that the big shocks of recent years will not be repeated, and we remain in month-on-month inflation at pleasant values close to zero, then inflation should ease to around seven percent in the coming months."

• The official added that due to the base effects, inflation should ease sharply to around two percent in January. He added that CNB staff are now working on a new macroeconomic forecast, so these numbers can still be refined somewhat.
• The Summer Forecast will be published alongside the next monetary policy decision on August 3, with the introductory part of the Monetary Policy Report due the day after. The full MPR will be published on August 11, alongside CNB minutes.
• Mateju assessed that the CNB's inflation forecast has proven accurate, with inflation reaching around +10% Y/Y by this stage. Czechia had "slightly higher pressures from the domestic economy in the form of core inflation," but "foreign price pressures eased somewhat faster."
• Mateju's comments imply that the CNB could reach its inflation target already at the beginning of next year. However, he cited Bank Board communications indicating an intention to keep interest rates higher for longer than suggested by staff forecast.
• The economist noted that current market bets on four standard-sized rate cuts by the end of 2023 "may ultimately prove to be overly optimistic" and cited Governor Ales Michl's remarks from his latest press conference.
• Mateju added that the current CZK exchange rate supports the objectives of monetary policy. In his view, it can weaken amid shrinking interest-rate differentials, but "it shouldn't be drastic, jumpy."