03/05/2024 16:01
The
Czech National Bank cut interest rates again by 50bp, bringing the key repo
rate down to 5.25%. This time, the decision was unanimous. Inflation has
reached the target and the CNB expects it to remain close to 2% throughout the
forecast horizon. However, the bank board still favours a slower pace of rate
cuts than the CNB staff forecast. This is mainly due to the weaker koruna and
the rapid rise in service prices. We expect another 50bp rate cut at each of
the next two meetings. By the end of the year, we forecast the repo rate to
fall to 3.5%, which should be its terminal level. According to Governor Michl,
the majority of the board sees a neutral rate around 3.5%. However, the CNB’s
forecast continues to use 3% as the neutral rate, so there has been no change.