The new CNB forecast
New vs. older CNB forecast
Risk to the forecasts remain significant due to Covid-19
The CNB Board assessed the risks of the forecast as significant, but not biased in either direction. One of the highest uncertainties is the speed of both the European and domestic economic recovery. The development of the exchange rate may be an anti-inflationary risk, while fiscal policy in the coming years may be stronger than expected, thus pro-inflationary. Governor Rusnok mentioned the uncertainties associated with the political cycle due to upcoming elections, which may lead to higher fiscal spending.
Stability of rates as the most likely scenario
Today's CNB decision was unanimous and the Board seems to be satisfied with the current monetary policy stance. As we stated earlier, we currently expect rates stability and their possible growth in the second half of next year. This is also the current CNB baseline scenario, however, the risks to these developments remain high, which was highlighted a few times during the press conference by Governor Rusnok.
The tone of today's news conference and Q&A session should be rather neutral for the market, as there were no big surprises. Also, Governor Rusnok did not indicate that the CNB is anyway concerned by a stronger exchange rate approaching the 26 EUR/CZK border, which some market players could have feared before the conference. As such, no surprise from the CNB today, either in the policy setting nor in the revised macroeconomic forecast.
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