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Czech Republic: On hold, but more cuts in the pipeline

Thu, Sep 25 2008, 12:26 GMT
by Lars Rasmussen

Danske Bank A/S


The Czech central bank (CNB) today decided to keep its key policy rate unchanged at 3.50% - this was in line with our expectation and consensus forecasts. CNB gave no comment on its decision but is scheduled to hold a news conference at CEST 14.00.

Consumer inflation soared over the last year - see chart below - due to rising food and energy prices, an easing of rent regulations, and tax hikes. Latest data show that inflation was 6.4% y/y in August, and we expect it to drop to the central bank's target of 3% y/y next year. This is due to: i) a relatively strong base effect; ii) lower oil prices; iii) the Czech economy is likely to slow significantly in the coming quarters.

Published on  Thu, Sep 25 2008, 12:28 GMT

Danske Bank  | Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com

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