Czech central bank expected to raise rates again on August 5, more later: poll

Six analysts see one more hike by end-2021

  

PRAGUE- The Czech National Bank is expected to raise interest rates again on Aug. 5 after the bank started an upward path in June as inflation pressures linger in the economy as it recovers from the COVID-19 pandemic, a Reuters poll showed.

Three central bankers have said since the June 23 meeting that monetary policy tightening should continue at subsequent meetings.

One central banker has suggested the possibility of a 50-point increase, citing the risk of untangling of inflationary expectations. 

In the Reuters poll, all 11 analysts saw the key two-week repo rate rising by 25 basis points to 0.75% this Thursday.

Looking further ahead, six respondents in the poll predicted one more hike by the end of this year, projecting the main rate at 1.00% in December. Three analysts saw the main rate at 1.25 by the end of 2021.

In the previous poll ahead of the June meeting, seven analysts predicted the main rate to reach 0.75% by the end of 2021, and four saw it at 1.00%.

Elsewhere in central Europe, Hungary's central bank raised rates on July 27, adding to a hike from June. 

The Czech central bank will also update its macroeconomic outlook on Thursday. It is likely to project a faster rise of rates than the previous forecast from May, which indicated three rate hikes this year.

The forecast will build on economic recovery, after gross domestic product rose by 0.6% quarter-on-quarter in the April-June period and by 7.8% year-on-year.

The year-on-year figure represented the fastest growth on record after a sharp drop a year ago amid COVID-19 lockdowns.

There are three more rate-setting meetings scheduled this year after the Aug. 5 meeting.

The market is pricing in three more hikes within the next six months, according to the forward rate agreements (FRAs).

(Reporting by Robert Muller; Editing by Bernadette Baum) ((robert.muller@thomsonreuters.com; +420 234 721 615; Reuters Messaging: robert.muller.thomsonreuters.com@reuters.net))


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