The Czech National Bank (CNB) raised its main interest rate by 25 basis points to 0.50 per cent in early November. The bank had also increased the rate in August, in doing so becoming Europe’s first monetary authority to embark on a tightening cycle, emerging-europe.com writes..
“The increase in interest rates will have a negligible impact on the Czech economy because it is mainly limited by aninsufficient number of workers,” Milan Frydrych, a macroeconomic analyst at Raiffeisenbank Czech Republic, tells Emerging Europe. “Still, it will at least help to cool off price growth in the real estate market via higher interest on mortgages. Czech house prices went up by 13.3 per cent year-on-year in the second quarter of 2017 and have been growing at one of the fastest rates in Europe over the past few years. With regard to commercial loans, there will be little impact because there is an abundant amount of money on interbank market,” he adds.
Mr Frydrych believes that the Czech koruna appreciated right after the announcement of the repo rate increase, but the dovish tone of Governor Jiří Rusnok disappointed the market, leading to a quick depreciation. “This, and the new macroeconomic forecast of the CNB lead us to the conclusion that there are no hints of faster tightening of monetary policy. The appreciation of the Czech koruna will be smooth, with occasional swings. Overall, the CNB’s decision and approach towards normalisation of monetary policy is cautious,” he says.
Read full article by emerging-europe.com.
13th May 2019