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Czech Republic: The king Zdenek Tuma
Fri, Jun 1 2007, 09:21 GMT
by Stanislava Pravdova
At today’s monetary policy meeting, the Czech central bank (CNB) decided in favour of a 25bp rate hike. The voting score was equal as the CNB board members voted 3-3 and the rate hike was pushed through decisively by the governor’s vote, who obviously advocated the rate hike.
At the press conference following the monetary policy meeting, the governor said that the rate hike came out due to a build-up of “slightly pro-inflationary risks” deriving amongst others from wage growth, which may feed into stronger inflationary pressures but also due to a slightly weaker Czech koruna (CZK). Furthermore, governor Tuma said that views on the timing and size of future interest rate rises among CNB board members will most likely differ.
After today’s rate hike, the CNB will take a few months break before it restarts its tightening cycle. We still keep our Czech interest rates forecast and we do expect one more 25bp rate hike this year, however, the timing is very uncertain and is conditional on the inflation but also the CZK’s development. Our EUR/CZK forecast is 28.20, 28.20 and 28.30 in 3, 6 and 12 months’ time, respectively.
Published on Fri, Jun 1 2007, 09:21 GMT
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