The Czech koruna remained in a narrow range yesterday. The Czech currency started at 28.37 EUR/CZK and weakened above 28.45 in the morning. The U.S. dollar correction helped the koruna to gain again and it traded at 28.35 EUR/CZK in the evening.
Today the market will watch the comments after a meeting of the CNB Bank Board. No rate change is expected but the markets is curious about the Board statement. A new quarterly inflation forecast is on the agenda today and therefore the central bank’s view on the next year inflation will be important for the interest rate expectations. In our opinion there are no demand inflation pressures but present jump in fuel prices can slightly increase the inflation forecast. We expect that the inflation will stay near the CNB’s target (3%) in the first half of 2006 but later it will drop to nearly 2.5%. The next year will bring an increase of regulated rent and energy prices and so the inflation will grow slightly again. But the strong koruna, which is a thorn in CNB' flesh, will mitigate the inflation pressures. Today the koruna will be traded in narrow range awaiting the CNB statements.
(CSOB - Investment research)