MNI CNB Preview - August 2025: Is Easing Cycle Over?

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Executive Summary:

• Consensus is virtually unanimous in calling for an on-hold rate decision.
• Soaring property prices and recovering consumer demand pose inflationary risks.
• Recent communications pointed to limited room for further easing.

The call for a stand-pat rate decision from the Czech National Bank (CNB) this week is virtually unanimous as the continuation of the current monetary easing cycle hangs in the balance. Several policymakers have recently floated the idea of terminating the cycle as they ruled out an imminent cut. Czechia’s property market is running hot, while domestic demand picks up, creating upside risks to core inflation outlook. Meanwhile, the two-week repo rate is already at the upper bound of its estimated neutral range. All this considered, we expect the Bank Board to decide to keep the policy rate on hold, most likely by consensus. The risks are related to the tone of Governor Aleš Michl’s already hawkish rhetoric, with CNB watchers on the lookout for more formal and direct cues that the rate-cutting cycle could be over.