Commerzbank’s Tatha Ghose interprets Czech National Bank (CNB) deputy governor Eva Zamrazilova’s remarks as signalling that June’s 25 bp hike was a one-off fine-tuning move rather than the start of a new tightening cycle. With the board feeling it has caught up and likely to pause, markets may still price a residual chance of another hike, providing marginal support for the Czech koruna.

Zamrazilova hints at cautious CNB pause

"CNB deputy governor Eva Zamrazilova’s latest remarks to the budget committee portrayed a picture that the 25bp rate hike of 18 June was conceived as ‘fine-tuning’, not a pivot into a new tightening cycle."

"This suggests that the board now feels it has “caught up” for the moment and can afford to wait for more information, rather than pre-committing to a sequence of hikes."

"Zamrazilova’s remarks strongly point towards a pause in August, with some debate potentially re-opening in September after new projections have been published."

"But, the CNB board appears to be making room for a more dovish assessment. Our own experience suggests that Zamrazilova’s messaging is unlikely to be isolated or uncoordinated. We would not be surprised if governor Ales Michl and many other board members expressed similar views, going forward."

"For markets, CNB’s still cautionary language means that the prospect of one more 25bp rate hike later in the year may linger on in the pricing (even if this never comes to fruition). And, this will be supportive for the koruna, at the margin."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)