CNB will keep rates on hold and should be able to convince the market anyway – Commerzbank

FXStreet Insights Team FXStreet

The Czech National Bank (CNB) is expected to maintain its policy rate unchanged in its meeting today. Economists at Commerzbank expect the central bank to convince the market of its strategy.

CNB will only consider a further rate hike if inflation turns out to be more stubborn

“CNB will likely rely on global as well as national inflation easing next year and will therefore most probably keep its key rate unchanged at 7% today.”

“Since the CNB had expected 18.8% for November anyway it might use the lower 16.2% as an argument to justify its rate decision today. As a result, the CNB is likely to be able to convince the market of its strategy.”

“The CNB board will probably only consider a further rate hike in case inflation turns out to be more stubborn after all, currently it is avoiding that for fear of the possible effects on the economy.”

“During the course of 2023, it will then emerge whether the CNB was right and whether its strategy of keeping the key rate at 7% will work out as real interest rates will rise simply as a result of falling inflation rates. If that is not the case the CNB will likely have to increase FX interventions against the expected CZK weakness or it might even have to hike the key rate once again.”

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FXStreet Insights Team

FXStreet

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