Research Briefing | Mar 29, 2023

Czech Republic: CNB inactivity continues

The Czech National Bank again kept the policy rate unchanged at 7% for a sixth consecutive time at the meeting today. This was expected by us as well as the markets.

What you will learn:

  • While the board reiterated its intention to keep rates higher for longer, we maintain our expectations of a rate cut already in June, compared to market expectations of August. Demand pressures have evaporated from the economy as consumer spending plunged and the economy slid into a recession.
  • The CNB remains committed to prevent exchange rate volatility, but we think the koruna is overvalued following the strong appreciation from November.
  • The March meeting was the first one for the new makeup of the board, with two new members – Jan Kubicek and Jan Prochazka – replacing Tomas Holub (hawk) and Oldrich Dedek (dove).
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