Market indicators indicate limited expectations for further
interest rate hikes, as the previous tightening cycle between 2021 and 2022 had
already raised the base rate by 675 basis points to 7.00%. Analysts interpret
the April inflation data as supporting the view that additional rate hikes are
unlikely. Factors such as easing gas prices and weakened demand contribute to
this perspective, suggesting that inflation could continue to decrease.
Despite food prices rising by 17.3% in April, the growth of
electricity prices, which had previously been a significant driver of
inflation, slowed on a year-on-year basis. The central bank anticipates that
headline inflation, which reached a three-decade peak of 18% in September of
the previous year, will gradually decrease to single-digit rates in the second
half of this year. Looking ahead, forward rate agreements imply expectations of
approximately 50 basis points in interest rate cuts by the end of 2023.
Across Central Europe, neighboring countries are also
dealing with elevated interest rates. Hungary's central bank, combating
inflation exceeding 20%, recently reduced the upper limit of its interest rate
corridor, potentially paving the way for future rate cuts. Similarly, Poland's
central bank maintained its main interest rate at 6.75%, considering that
slowing growth will help curb inflation.
Source: Prague Morning
Prepared by the team of foreign office CzechTrade and
CzechInvest San Francisco