The CNB decided to hike interest rates by 25bps. The main two-week repo rate reached 3.25%. This hike was unexpected, but most of the analysts, including us, counted on this rate rise at a later date.
The surprise is mainly timing - when would rates increase for the second time in row? Weaker economic data, CZK strengthening and a probable postponement in the rate of growth in the Eurozone were overweighed by the growth trends in wages, retail sales and employment. The interest rate hike could have also been accelerated by the approval of the tax reform measure, which can influence financial expectations with respect to the economy.