The Governing Board of the Czech National Bank will most probably cut interest rates by 25 basis points at its meeting on Feb. 23, most of the analysts polled by CTK noted, pointing at the firming Czech crown as the main reason for this. At the same time, economists noted that inflation was getting close to the target value, due to the growth in regulated prices, thus working for flat interest rates.
Still, analysts expect CNB to choose the weakening of the crown than price stability. On the other hand, we note that European Central Bank, which will have a meeting on March 2, will almost certainly raise its interest rates from the current 2.25 to 2.5%, so CNB could wait for the reaction of financial markets to the higher interest rates in euro zone, though CNB governor Zdenek Tuma had said several times that the CNB was independent of the ECB’s decisions. Therefore, we consider that the probability of a rate cut stands at 50%.