CZECHIA: Czech Banking Association Revises Czechia's Growth Outlook Higher
The Czech Banking Association (CBA) revised Czechia's GDP outlook higher in the latest round of quarterly forecasts and now sees GDP growth at +2.1% Y/Y this year (versus +1.7% projected in May). Looking further afield, the economy is expected to expand by 2.0% Y/Y in 2026.
- 'The improvement comes despite the higher 15% US tariffs, which are expected to remain in force in 2026. The impact of trade wars continues to figure strongly in the forecast, which, according to the CBA survey, will take 0.6% points off Czech GDP in 2025 and 2026, but less than the May consensus of -0.8% points.'
- The better forecast comes on the back of 'a stronger outlook for export activity, supported by foreign demand' and 'a better initial state of the economy'. This is 'despite a slightly higher forecast for this year's +2.5% Y/Y consumer inflation, which, however, is pointing closer to the centre of the central bank's inflation target in 2026 with an estimated annual growth of +2.2%.'
- 'The CBA's forecast therefore continues to look for a cautious reduction in the CNB interest rate to 3.25% in Q1 2026, also thanks to a stronger koruna and a lower ECB interest rate and Fed monetary policy. However, the outlook for the CNB rate is a quarter percentage point higher than in the May forecast.'
- 'Considering the dispersion of forecasts for Czech economic growth and consumer prices among the panellists and their view of the CNB's monetary policy, the outlook for the CNB rate is associated with a risk of a slightly larger cut to 3% in 2026 than with its stability at 3.5%.'
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EGBS: J.P.Morgan Recommend OLO Longs Vs. OATs & Bunds On Fly
J.P.Morgan recommend longs in 10-Year OLOs on an evenly weighted France/Belgium/Germany 10-Year butterfly.
- They suggest that Belgian paper is likely to richen on this structure as they “expect the market to price increased political uncertainty and associated rating downgrade risks for France as the 2026 budget discussion picks up”.
US TSY OPTIONS: TYU5 112.50 Calls Lifted
TYU5 112.50 calls vs 111-03, paper paid 0-17 on 30K.
ECB: ECB Speak Wrap (July 7 – July 21)
For the full publication, click here.
The volume of ECB speak has reduced notably since our last update two weeks ago. The main development since then has been US President Trump’s threat of 30% tariffs on EU exports from August 1. However, Reuters sources suggested that while this threat has “complicated” decision making for the ECB, it is not likely to “derail plans for a pause in rate cuts” at this Thursday’s decision.
- Market pricing remains consistent with one more 25bp cut this cycle, which is in line with the implied rate curve embedded within the ECB's June macroeconomic projections.
- However, the Governing Council is appearing increasingly divided as to whether more easing is justified at this stage, and even if another cut is warranted, whether it should be delivered in September or later in the year.
