MNI CNB Preview - Feb 2025: Cut Seems “Very Likely”
Executive Summary:
- Guidance from several members underpin consensus call for a 25bp cut.
- Bets on easing increased after December inflation undershot expectations.
- Flash January CPI, due hours before the rate decision, is a key source of uncertainty.
Full preview including summary of sell-side views here: MNI CNB Preview - February 2025.pdf
The release of below-forecast December CPI data followed by dovish CNB speak tilted consensus towards a resumption of monetary easing. Defying expectations, Czechia managed to avoid a temporary breach of the inflation target into the year-end, prompting Eva Zamrazilová and Jan Prochazka to flag their growing dovish bias. Governor Aleš Michl subsequently sent an unusually strong dovish signal, noting that a 25bp rate cut at the upcoming meeting was “very likely”. However, while joining the call for a 25bp cut, we do not expect the likely dovish shift in interest-rate action to be reflected in the Bank Board’s rhetoric. Concerns about residual inflationary pressures, particularly in the services sector, continue to linger. Meanwhile, the proximity of neutral monetary policy settings leaves limited room for a further reduction of policy restrictiveness amid the CNB’s strategic goal of maintaining a hawkish long-term stance.
