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Czech CB Likely To Hike Policy Rate Amid Strong Inflation

The Czech central bank is likely to raise its interest rate by 25 basis points at its next meeting in early November, as inflation accelerated to a five-year high in September, Liam Carson, an economist at Capital Economics, said.

Headline inflation rose to 2.7 percent in September from 2.5 percent in August, data from the Czech Statistical Office showed on October 9.

“The pick-up in inflation was mainly driven by three factors,” the economist observed.

First, food inflation edged up from 5.6 percent to 5.7 percent.

Second, fuel inflation rose further on the back of last month’s jump in global oil prices.

Third, and most importantly, it appears that core inflation continued to rise, the economist said.

The Czech National Bank’s adjusted inflation series is the measure of core inflation that the Monetary Policy Committee tracks most closely.

Although September’s core inflation data has not yet been released, using the the recent CPI figures, Capital Economics estimates that it climbed to 2.8 percent annually – the highest rate in the ten-year history of the series and close to the upper-end of the central bank’s 1-3 percent target range.

“The Czech MPC will follow up on August’s 20bp interest rate hike with a 25bp hike – taking the policy rate from 0.25 percent to 0.50 percent – at its next meeting on 2nd November,” Carson predicted.

The material has been provided by InstaForex Company – www.instaforex.com