Economists at Société Générale are closely analyzing the potential impact of the Czech Central Bank‘s decision on the EUR/CZK pair. The decision is expected to be a close call between no change and a 25 basis points cut. While most economists surveyed by Bloomberg anticipate a rate cut, Société Générale is in the minority camp, predicting a first reduction in February 2024.
Headline CPI decelerated to 7.3% in November after reaching 18% in September 2022. The CNB’s baseline forecast is for inflation to drop below 3% in 1Q24. The dilemma faced by the Czech National Bank is whether to wait, maintaining positive real rates, or to trust the forecast and implement a rate cut today.
For the EUR/CZK pair, the decision could have a significant impact, determining whether it returns to 24.60 or moves towards 24.20.
