Economists and businesses are preparing for a possible increase in interest rates on Wednesday, when the Czech National Bank’s council meets to discuss the country’s macroeconomic situation. Given the weak exchange rate of the koruna versus the euro (currently at 26 per euro) and an economy that’s increasingly being described as overheated, many experts seem to be expecting a rise of 25 bps. The move appears to be inevitable but it’s also not guaranteed to have any effect.
“The rapid rise in wages, the volume of mortgages and the weak exchange rate are pointing to a more rapid rising of interest rates,” Deloitte’s chief economist David Marek told the Czech News Agency. “That’s why it shouldn’t be a surprise if the Czech National Bank acts as early as June, or over the holidays.”
ING’s chief economist Jakub Seidler says the koruna’s unexpected weakness is being aided by global factors. “That means, however, that even a second raising of rates by the CNB might not have a big impact because the market has already factored them in. If the CNB doesn’t start sending more hawkish signals, the koruna could have trouble just getting to the level of CZK 25 per euro.”
