Czech National Bank board decided to leave interest rates unchanged on its regular meeting yesterday. A possibility of interventions on the FX market was also discussed, however, CNB decided not to step in the market. A point of critics of CNB became a union’s demand for a 10% rise in nominal wages next year. CNB declared that such a claim could threatened macroeconomic stability and bring upward inflation pressures.
A volume o broad money, M2, increased by 6.5%, y-o-y, in October, whilst volume of more liquid money, M1, rose by 13.6%. Client credits of commercial banks and CNB dropped by 6.8%. Client deposits with bank increased by 4.8%.
Transport prices should lift by 20% according to statement of the transport union’s. They claimed that transport prices should be adjusted to increasing costs. Such an increase would bring inflation forecast to a possible revision.
The CNB decision calmed markets and the Czech koruna could stabilise at 34.62 to the euro after volatile early trading. The CZK/USD exchange rate stood at 39.87 late on Thursday.
After few very quiet days, bonds strengthened on Thursday. Just one day prior to government bond auction, it is still very unclear what the results could be, however it looks likely that demand will be pretty high. With that fact and the IRS dropping by as much as 8 bps on the long part of the yield curve, the longest bonds jumped up by a trading spread. Friday might be slightly bullish again, with the auction results the main factor for the secondary market. The results will be known at about 2.00 PM.
Current benchmark prices: MoF 6.75/05 98.95-25 (+20 bps), MoF 6.30/07 93.90-20 (+30 bps), MoF 6.40/10 91.70-00 (+30 bps).