Czech Koruna: Hawkish CNB pause may support CZK – Commerzbank

Commerzbank’s Michael Pfister expects the Czech National Bank (CNB) to keep rates unchanged today, in line with Bloomberg consensus and market pricing. Despite firmer inflation, officials still see policy as sufficiently restrictive, with a hint of future hikes. Pfister argues that the CNB’s relatively hawkish stance versus Poland and Hungary should support the Koruna, though markets may be overpricing tightening.

CNB stance seen supportive for Koruna

"The Czech Central Bank (CNB) will wrap up today’s interest rate decisions this afternoon. The decision itself is unlikely to be particularly exciting: All economists surveyed by Bloomberg expect interest rates to remain unchanged, and the market has already fully priced in such a decision."

"Although the latest inflation data has picked up, making rate hikes seem more urgent, recent statements by officials suggest that monetary policy is (still) sufficiently restrictive."

"Therefore, today’s decision is likely to result in unchanged rates, with a hint that further rate hikes could follow in the future."

"The CNB’s relatively hawkish stance compared to the Polish and Hungarian central banks should continue to support the koruna in the coming months. The only problem here is that expectations seem to have gone quite far - the CNB is expected to tighten policy by as much as 125 basis points over the next twelve months."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)