On Wednesday, Central European currencies slid against the euro and extended their previous losses. While the koruna and the forint posted only negligible losses, the zloty fell by about 0.5 %. In the afternoon, markedly slowing industrial production (+0.5% Y/Y in August) put additional pressure on the Polish currency. Weaker than expected figure provides additional support to prospects of monetary easing at the next meeting of the Polish National Bank (October 3rd) and we think the probability of the rate cut currently stands at about 70 %.
Meanwhile, Mojmir Hampl - vice governor of the Czech National Bank (CNB) - told Reuters that he was not yet decided whether he would vote for a rate cut at the next Board meeting (27th September). Still, we maintain our view that the CNB might cut its main repo rate to a new all-time low of 25 basis points. The vote might (again) be thin - we guess that three members of the Board could vote in favor of an additional stimulus whereas two other central bankers would like to keep rates unchanged. Mr. Hampl - one of the two Board members whose vote is, in our view, uncertain - said he saw no reason for introduction of unconventional monetary policy tools currently being used in many advanced economies. In his opinion, the Czech economy experiences a divergence between sentiment and fundamentals and employment of unconventional tools might, in fact, undermine confidence of Czech households and make them cut spending even further.