Commerzbank’s Tatha Ghose expects the Czech National Bank (CNB) to keep its policy rate at 3.75%, framing June’s hike as fine-tuning rather than a new cycle. With headline and core inflation still within target, CNB can wait but must avoid sounding dovish. Ghose sees EUR/CZK moving sideways around 24.20 over the coming month, while Iran-related risks could still force further tightening.
CNB stance and EUR/CZK range
“The Czech National Bank (CNB) is unanimously expected to leave its policy rate unchanged at 3.75% later today. This should not come as a surprise because board members have spent recent weeks stressing that the June 25bp rate hike was ‘fine-tuning’, not the start of a new tightening cycle. Governor Ales Michl continues to sound hawkish on domestic inflation risks, meanwhile other members such as Jan Kubicek and Jakub Seidler have also argued that there is no need to move quickly and that one more hike by year-end could be sufficient.”
“The latest CPI data do not force an immediate move either. July headline inflation picked up to 1.7%y/y from 1.5%y/y, exactly in line with expectations and still within target. Fuel prices were the main driver, rising by an estimated 3.6%m/m, which is not surprising against the global backdrop.”
“This can change in coming months, but CNB can afford to wait today, although it cannot afford to sound dovish. Lending growth remains robust, nominal wage growth is likely still strong, and house prices remain the board’s focus. If the Iran situation were not to calm down, pro-inflationary risks would rise visibly and further rate hikes would become very likely.”
“But against a slightly constructive news backdrop at present, we see EUR/CZK trading sideways in the 24.20 range over the coming month.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)