Czech National Bank likely to hike rate by 25 bps twice in coming months

The recent ECB decision is unlikely to considerably impact the expected monetary tightening of the Czech National Bank in the short run. Given the overheating of the Czech economy, the CNB is likely to hike by 25 basis points two times in the months ahead – first in November and second in December or February, stated Erste Research Group in a research report.

But, the dovish tone of the European Central Bank might impact the Czech National Bank’s rate setting next year as the CNB will have to be more cautious about the interest rate differential. A rising rate differential might reinforce the exchange rate, thereby tightening overall monetary conditions and therefore decreasing the requirement for additional hikes.

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