Actual: 0.75 %
Consensus: 0.75 %
Previous: 0.75 %
The CNB has left interest rates unchanged. In a repeat of last meeting, two Board members opposed, voting for a 25 bps hike. May staff projections are still valid - they expect inflation to be around the 2 pct target and count with the first rate hike to come in the 4Q. Last data about the GDP, wages and inflation were all above the CNB´s assumption. The unemployment rate was lower. This can be seen as an upside risk for inflation projection. Moreover, the VAT will likely go up at the beginning of the next year. However, the bank still considers the risks in total as balanced. On the other side, there is a lower outlook for interest rates abroad and the current Eurozone debt crisis. The koruna FX rate was not mentioned as an important risk. Currently, the rate stands close to the CNB assumption.
The rate decission was in line with expectations and the statement did not surprise. The meeting outcome should, therefore, be neutral for the koruna. We still expect that the CNB will start a tightening cycle in the 3Q - at one of the following meetings. However, the recent macro data from the western economies have brought some negative surprises. If it is not just a short-lived worsening, the pace of the ECB tightening may slow down. This is also risk for the Czech hike that might, in that case, come somewhat later.