CNB lowered interest rates to 1%
We expected stable rates together with majority of analysts.
CNB mentioned (voting 4 for stability and 3 for lower rates) exchange rate as anti-inflationary risk
(exchange rate weaker than expected in quarterly outlook) and anti-inflationary risk is posed also by
wages (possible low growth of wages next year). Macroeconomic data published form last CNB meeting
did not bring any change in perceived risks. Latest changes in next year's budget increased proinflationary
impact of deficit spending. So, we think that today's decision of doves form last meeting is
not very consistent.
Likely reason for lowering rates is asymmetrical perception of risks (for example frequent and quite
substantial revisions of GDP numbers up and down). This asymmetry may imply preliminary caution,
thus better to lower rates and create cushion zone in the case of adverse development. We think that
CNB may be prepared to take back today's decision in the case of normal development of economy.
We expect interest rates on 1.75% in the end of next year, thus no fast normalization of interest rates
level. Reason for expected sloe growth of interest rates is stagnation or even decline of personal
We do not expect strong reaction of koruna. Market partially took into account possibility of lower rates.
Moreover, koruna is together with other regional currencies dragged mainly by changes in risk aversion
and attitude towards emerging markets and broadly risky assets.
We should know more after press conference, which begins 15:30 CET.