By Jason Hovet
PRAGUE (Reuters) – The Czech National Bank (CNB) is likely to hold interest rates steady at its final policy meeting of 2022 on Dec. 21 and will not begin cutting rates until the second half of 2023, a Reuters poll showed on Friday.
As signs emerged inflation is starting to ease after hitting the highest in three decades, most analysts in the poll expected the Czech central bank to keep its two-week repo rate unchanged at 7.00% throughout the first half of 2023.
The central bank launched one of Europe’s sharpest rate-hiking cycles last year, but has kept rates on hold since August after Ales Michl was made governor and three new members took seats on the seven-seat board.
Michl has backed rate stability to anchor an economy heading into a mild recession, although he and other central bankers have not ruled out rate hikes.
The bank has also been ready to intervene in currency markets to prevent a weak crown from adding to inflation pressures.
Five of the eight analysts who replied to poll questions on interventions said they expected the bank to keep acting in markets for at least six more months, while the others expected it to stop in the first half of the year.
No analysts in the poll expected the bank would need to raise rates further, with inflation starting to ease, helped by state measures to lessen the impact of high energy costs on households and companies.
Czech inflation was at 16.2% year-on-year in November, down from a high of 18% in September. The central bank said November inflation would be 3.6 percentage points higher without the government’s energy schemes.
Inflation is expected to return to single digits next year.
Analysts were split on the pace of rate cuts. The median forecast saw the base rate down to 6.50% in the third quarter, the period that seven analysts saw as the start of easing. The rate was expected to be 5.75% in the fourth quarter.
Two analysts forecast earlier rate cuts in the second quarter, while another two expected policy easing would not start until the fourth quarter of next year.
(Reporting by Jason Hovet; editing by Barbara Lewis)