While in Poland the monetary easing cycle seems to be over, which was confirmed yesterday by two members of the Polish MPC – Chojna-Duch and Zielenska-Chlebocka, the Czech National Bank sent different signals. Its Minutes, released yesterday, showed that several board members spoke in favour of immediately commencing foreign exchange interventions (against the CZK) to ease monetary conditions on the last meeting held on June 27th. This fact primarily weighed on the Czech currency and limited its possible gains yesterday.
Nevertheless, while the Minutes showed that the ČNB has been worried by further disinflation tendencies in the Czech economy, today’s data revealed slightly different picture. The May inflation surprisingly rose by 0.4% month-on-month and annually by 1.6%. This was more than the market expectations of 0.2% m/m and 1.3% y/y and it was even above CNB’s forecast (1.4% y/y). Although the price rise was mainly due to volatile food prices (3% m/m), which represent the second most important item in the consumer basket, the fact that the headline CPI returns to the CNB projections clearly speaks against forex interventions. No wonder that the market has interpreted higher-than-expected inflation as a bullish signal for the koruna, so the EUR/CZK pair has already slipped to 25.75 level.