Czech Republic
CNB leaves rates unchanged, but two Board members voted for a rate cut
Hungary
The fixed-income market has priced in deep rate cuts
Poland
Economy remains on track for the recovery
Overview
CE Central Banks in focus again
As far as the Czech Republic is concerned, the Czech National Bank sprang a small surprise, when two of the seven members of its Board voted for a rate cut at their last meeting. The market reaction to this ‘surprise’ has been moderate so far. Nevertheless, we cannot rule out more bets on another repo rate cut within the next days and weeks. Although we do not believe (at the moment) that the CNB Board will really cut its base interest rate early November, the market may feel, at least temporarily, that this might happen. Bets on a CNB rate cut may be raised particularly when September’s inflation data is released as the year-on-year inflation rate will slip into negative territory.
Hungarian fixed income markets were also in very upbeat mood recently. Prices already reflected the fact that the National Bank of Hungary (MNB) would cut its base rate. The bank as expected cut its base rate by 50 basis points on Monday. Some even hoped that a 75 or even a 100 basis points rate cut would be possible. However, just as last month, the bank preferred a safer route of ‘just’ a 50 bps cut in its base rate. The scenario of more additional rate cuts at the same pace (down 50 bps each month) is still valid until the end of the year. The scenario of the base rat hitting an all-time low of 6% in Hungary as early as in December is still on track.
