Czech Koruna: CZK softens against Euro as CNB waits – Commerzbank

Commerzbank’s Tatha Ghose reports that the Czech National Bank (CNB) kept its policy rate at 3.75% and returned to a wait-and-see stance after June’s 25bp hike, despite still citing upside inflation risks. Governor Ales Michl sounded less urgent and stressed a focus on core inflation over fuel-price volatility. With forecasts implying rate stability, the Koruna weakened slightly, and Commerzbank expects EUR/CZK to trade sideways near 24.20 in coming months.

CNB policy pause and koruna outlook

“The Czech National Bank (CNB) left its policy rate unchanged at 3.75%, as unanimously expected. No surprise. The more relevant signal was that CNB has settled back into wait-and-see mode after the 25bp June hike, while still describing the outlook as inflationary overall.”

“The board continues to cite elevated core inflation, robust nominal wage growth and possible acceleration in money supply growth as upside risks. But this is now familiar language rather than a fresh hawkish escalation.”

“Governor Ales Michl also did not sound particularly hawkish to us. He confirmed that the previous tightening has produced a more appropriate interest rate level, which is adequate for now, although he is leaving all options open for forthcoming meetings.”

“Michl also emphasised that CNB will focus on core inflation, not direct fuel-price volatility from the US-Iran war. This reduces the chance that every oil price move will be mechanically translated into rate hike expectations.”

“Hence, the koruna depreciated modestly after the press conference. We still see EUR/CZK trading sideways in the 24.20 range over the coming months.”

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