Wednesday, September 27, 2023 3:40 PM EDT
Photo by Rodrigo Ardilha on Unsplash
The bank board has prepared a strategy for cutting rates and is signaling its readiness. Each subsequent meeting is live now, but the CNB obviously does not want to commit too much to the next steps. All options remain open and will depend on incoming data. We believe that the new economic forecasts will be a sufficient reason for a rate cut in November.
CNB signals readiness to discuss rate cuts
The Czech National Bank meeting did not bring too many surprises today. Interest rates remained unchanged as expected, with all board members voting in favor of the decision. More interesting was the press conference, during which the governor mentioned that the strategy for cutting rates is ready, however, cutting rates was not discussed today. This confirms earlier indications and makes it clear that from November onwards all meetings are live for rate cuts. As expected, the board is keeping all options open and does not want to over-commit to specific actions.
The new economic forecasts should open the way for rate cuts
Although the market reaction was rather hawkish, we see two main dovish clues today. Governor Michl confirmed the readiness of the rate-cutting strategy and for the first time in a long time did not fight "excessive market expectations that may not materialise". Our forecast thus remains unchanged – the first rate cut in November.
The CNB's new economic forecasts will be released in November and are expected to show lower GDP growth both domestically and abroad and lower inflation compared to the August forecast. This should be enough for a rate cut. On top of that, we see downside risks to inflation in the coming months in food and energy prices, which are being repriced earlier than expected to some extent.
More By This Author:
US Government Shutdown Makes It Likely The Fed Is Finished Hiking FX Daily: King dollar, queen kronaAsia Morning Bites - Wednesday, September 27
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...
more
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.
Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.
less
How did you like this article? Let us know so we can better customize your reading experience.
