CZECHIA: Above-Consensus CPI Bolsters Calls for Unchanged Rates

The upside surprise in Czechia's CPI data was driven by volatile food prices, which are notoriously hard to predict, and which drove the downside surprise in September. Otherwise, the closely watched services inflation edged lower to +4.6% Y/Y from +4.7% prior, staying above the levels considered as 'normal' by the CNB. Post-CPI sell-side notes can be found in the image below, with analysts expecting no change to the 3.50% repo rate at tomorrow's CNB meeting. Click here for our full preview of the decision.

• Goldman Sachs do not expect today's inflation print to affect the MPC decision tomorrow and maintain their forecast for the policy rate to remain unchanged at 3.50% and for the Board to somewhat soften its hawkish guidance while not explicitly opening the door to a near-term rate cut. Nevertheless, reflecting their fundamentally dovish inflation views, Goldman expect the CNB eventually to continue its cutting cycle, with the policy rate reaching a terminal rate of 2.75% next year.
• ING say core inflation is poised to exceed the target, which will contribute to base rate stability if the economy continues to expand as expected and no substantial issues arise in the struggling German economy. They take the position that a reduction in energy prices will bring down regulated prices in January 2026 and weigh on headline inflation.
• JP Morgan note that the CNB is likely to keep the policy rate unchanged at 3.50% and that communication is likely to remain hawkish. They say this morning’s data confirm that core inflation remains too high versus the 2% target.