Czech crown keeps some strength before central bank rate decision

PRAGUE — The Czech crown inched higher

on Wednesday before a central bank decision likely to lean

toward maintaining stable policy while leaving the chance of

another interest rate hike ahead as inflation eases slowly and

price pressures simmer.

The Czech central bank (CNB) has pushed back against market

expectations of interest rate cuts in the coming meetings,

similar to other policymakers in central Europe who are not

willing to rush into policy easing with inflation still stuck at

double-digit rates.

Hungary took a tentative step last week to looser policy by

slashing the top of its interest rate corridor, paving the way

to later rate cuts to soothe slowing economies.

The Czech rate meeting comes, though, after preliminary

first-quarter gross domestic product data showed the economy

emerging from a mild recession, improving growth prospects.

With unemployment in the Czech Republic still the lowest in

the European Union and wage growth showing signs of heating up,

central bankers have been cautious to downshift into lower

rates.

Analysts in a Reuters poll forecast no change to rates on

Wednesday, but some said a possible hike could not be ruled out.

“The chances of a hike itself are small but it does not have

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to be a complete surprise,” J&T Banka analysts wrote in a note.

“Overall, we expect the CNB will keep rates flat not just

this year but also at the beginning of next year due to slower

deceleration of inflation and faster wage growth.”

Markets currently price in around 50 basis points in cuts in

the next six months.

The crown is sitting off a 15-year peak and its

strength has helped the central bank cool inflation. It was a

touch higher at 23.577 to the euro at 0851 GMT after easing from

its high of 23.233 in mid-April.

CSOB said the bank keeping the chances of a rate hike on the

table has helped the crown, but it may have already been worn

out. It added the crown could still find support from a

“markedly” hawkish tone after today’s policy meeting or more

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rate setters raising their hand for a hike.

The bank board voted 6-1 for unchanged rates at its March

meeting.

In other trade, the Hungarian forint led gains in

the region with a 0.1% rise to 374.50 per euro and the zloty

steadied at 4.579 to the euro.

Warsaw markets were closed for a holiday. Prague stocks

eased 0.4% and Budapest climbed 1.2%.

CEE SNAPSHO AT

MARKETS T 1051

CET

CURRENC

IES

Latest Previou Daily Change

s

bid close change in 2023

EURCZK Czech

EURHUF Hungary 0 0

EURPLN Polish

EURRON Romanian

EURRSD Serbian 0 0

Note: calculated from 1800

daily CET

change

Latest Previou Daily Change

s

close change in 2023

.PX Prague 1374.58 1379.93 -0.39% +14.38

00 %

.BUX Budapest 46019.4 45490.0 +1.16% +5.08%

3 1

.WIG20 Warsaw <.wig20>

.BETI Buchares 12278.8 12298.6 -0.16% +5.28%

t 6 9

.SBITO Ljubljan <.sbito p a> %

.BELEX Belgrade <.belex>

.SOFIX Sofia <.sofix>

Yield Yield Spread Daily

(bid) change vs Bund change

in

Czech spread

Republic

CZ2YT= 2-year s

CZ5YT= 5-year s

CZ10YT s

Poland

PL2YT= 2-year s

PL5YT= 5-year s

PL10YT s

FORWARD

3×6 6×9 9×12 3M

interba

nk

Czech

Hungary

Poland

Note: are for ask

FRA prices

quotes

********************************************

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(Reporting by Jason Hovet in Prague and Boldizsar Gyori in

Budapest; Editing by Krishna Chandra Eluri)