Czech central bank seen raising rates to highest since 2001: Reuters poll

Reuters

Published Mar 29, 2022 08:36AM ET

PRAGUE (Reuters) - The Czech National Bank is set to raise its main rate by 50 basis points to 5.00% on March 31, a Reuters poll showed on Tuesday, which would be the highest since 2001 as policymakers battle an inflation surge exacerbated by the Ukraine war.

The central bank has raised its two-week repo rate by 425 basis points since June, tightening aggressively to tackle inflation that hit a 24-year high of 11.1% in February. Price pressures are still building, spurred on by rising energy costs following the Ukraine conflict.

A Reuters poll showed most analysts expected the central bank to deliver one more big interest rate increase when it meets on Thursday, and only a few predicted borrowing costs would rise again later this year.

Nine out of the 12 analysts polled predicted an increase of 50 basis points this week and two expected a rise of 25 basis points. One expected no change.

Of the six respondents giving an outlook beyond March, three forecast the main rate would peak at 5.50% this year. In a January poll, only one forecast rates would rise above 5%.

The central bank will announce its decision at 2:30 p.m. (1230 GMT) on Thursday, followed by a news conference at 3:45 p.m. where Governor Jiri Rusnok will comment on the vote.

Prior to Russia's Feb. 24 invasion of Ukraine, which Moscow calls a "special military operation", central bankers thought it unlikely rates would climb above 5%. But opinions have changed.

Board member Tomas Holub told Reuters last week that he expected to be in the camp favouring a larger rather than smaller move at Thursday's meeting, but also said he was open to debate about raising to 5.00% now and further in May.

Vice-Governor Marek Mora said that he saw rates going "well above" 5%.

The central bank may also debate using its large international reserves, which stood at about 64% of gross domestic product in February, to fight inflation and not just as a tool to stabilise exchange rate fluctuations.