Czech Koruna: CNB path lifted on inflation risks – Standard Chartered

Standard Chartered’s Saabir Salad now expects the Czech National Bank to deliver two additional 25bps hikes, in November 2026 and Q1-2027, after a pre-emptive move in June. This would lift cumulative tightening to 75bps and the policy rate to 4.25% by end-Q1-2027. The bank also raises its 2027 CPI inflation forecast to 2.6% from 2.0% as Middle East risks persist.

Rate ceiling revised higher

"We now expect the Czech National Bank (CNB) to deliver a 25bps hike in November 2026 and another in Q1-2027; we previously saw no further hikes this year or next. Along with the 25bps pre-emptive hike in June, this would take cumulative tightening to 75bps, reaching a policy rate ceiling of 4.25% by end-Q1-2027."

"Markets are more hawkish than we are, pricing more than 100bps of tightening over the next 12 months. We think the CNB may be comfortable allowing some of this hawkish market pricing to persist."

"If this effect is strong enough, the CNB may not need to deliver all of the tightening priced in by markets. We therefore see balanced risks to our call."

"Domestically, core inflation – the key metric for policy makers – has remained elevated this year at around 3%, the upper bound of the central bank’s target range. Externally, the outlook will depend on the Middle East conflict, particularly its implications for energy prices."

"The rate paths of major central banks are also important: a more hawkish Fed and ECB would increase the likelihood of further CNB tightening beyond November, while a dovish repricing could allow the CNB to remain on hold after a November hike."

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