In line with our forecast and market expectations, the CNB bank board decided to cut interest rates by 25bp. The two-week repo rate therefore fell to 6.75%, leaving the stable level of 7.00% after 18 months. All seven board members voted in favour of the 25bp rate cut. |
Globally, interest rate markets are not yet in a calm Christmas mode, causing turbulences in FX markets. Aggressive bets on interest rate cuts for the ECB and Fed have stirred up the currency markets in the US and Switzerland and put pressure on the euro. In the Czech Republic, the central bank, as well, could cause the EUR/CZK exchange rate to fluctuate before Christmas. In Hungary, in contrast, things have already settled into a wintery peace with developments in line with our expectations. This issues features
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Inflation fell from 8.5% in October to 7.3% in November, in line with our and the market forecast. The main reason was again the benchmark base, which was affected by the adoption of the austerity tariff effective during the last three months of last year. |
With the publication of inflation and labor market data in the US, the dollar faced quite a headwind, pushing EUR/USD upwards. The recent increase in the EUR/CHF exchange rate raises the question of whether the Swiss National Bank started a looser franc policy. Elsewhere, the currencies of the CE-3 countries have strengthened. While Poland and Hungary continue to experience this trend, the Czech Republic has only seen a temporary appreciation. Moving further east, the Russian rouble is benefiting from a growing trade surplus, and the National Bank of Ukraine (NBU) seems to keep the hryvnia at a stronger level until year-end, contrary to our initial assumption. This issues features
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As global central banks shifted towards "high-for-longer", most of CEE is set for (further) key rate cuts. Still, despite the expected easing, the lagged effects of the fast and sizeable hiking cycles will still be felt. Meanwhile upside risks to inflation, the stance of ECB and the Fed will all warrant a cautious approach to rate cuts. |