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Central Europe
August 4, 2017 www.intellinews.com I Page 13
A new inflation report is due to be released next week. The CNB said in its press release, however, that it expects core inflation to be fairly stable over the next 12-18 months, and that headline inflation will drop to its 2% target by early next year.
The CNB also noted it is eyeing a drop in imported inflation. Such issues have stayed the hand of policymakers in neighbouring Hungary and Po- land, although interest rates in those countries have remained significantly above the Czech level. Another pressure point for the central bank is policy at the European Central Bank, which has pledged to keep its ultra-loose stance in place for some months.
As they were ahead of the August meeting, ana- lysts are split on their forecasts for monetary policy in the coming months. At Capital Economics
they predict a gradual cycle of rising interest rates to 0.75% by the end of 2018.
“We think inflation will be higher than most expect,” writes Liam Carson. “With the economy now operat- ing at full employment, we expect wage growth to remain strong. The upshot is that, unlike the [CNB], we see core inflation rising a little further over the coming months. This will push headline inflation up towards the top end of the Bank’s 1-3% target range by end- 2017 and we expect it to remain above the 2% mid-point of the range next year too.”
At Komercni banka they still suggest another hike could be on the cards this year, although they note that the CNB guided for a pause of up to 12 months. "This is a long time to wait, given the CNB’s significantly improved outlook for GDP growth in 2017 and 2018," the analysts write.
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