Czech National Bank likely to hike rates in Q1 2018, shows survey

Bloomberg analysts’ latest survey indicates that the market consensus does not expect a change in the Czech National Bank’s policy rate in December, but expects a 25 basis point rate hike in the first quarter of 2018. However, according to a Commerzbank research report the central bank is likely to hike 25 basis points in December itself.

The Bloomberg survey also shows upward revisions to GDP growth forecasts for 2017-2019. Forecasters hiked their 2017 estimate from 3.2 percent in an August survey to 4.3 percent in this November survey. CNB governor Jiri Rusnok has recently labeled this as a 50 percent probability outcome.

“With each passing week, we have received anecdotal evidence that Q4 will record better growth than Q3 did: for example, the PMI is stronger now; and GDP is expected to rise by 0.7 percent q/q in Q4 compared with 0.5 percent q/q in Q3”, stated Commerzbank.

Given the Czech National Bank board was already concerned about letting interest rates staying too low for too long, there is no reason why they would wait and watch now instead of continuing with the hiking cycle, said Commerzbank.

“The outcome is quite evenly balanced in terms of the precise timing - December 2017 or early-2018 - we do not expect the exact timing to make much of a difference to the koruna”, added Commerzbank.

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