MNI CNB Preview - May 2025: Close Call

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Executive Summary:

• Consensus is for the CNB to cut the repo rate by 25bp to 3.50%.
• Flash April CPI missed both consensus and the CNB's target...
• ... but the structure was less benign, with services inflation quickening.

The Czech National Bank (CNB) may be nearing the end of its rate-cutting cycle, but fine-tuning the repo rate by another 25bp to 3.50% is on the table, even though it would likely be framed as a “hawkish cut”. Below-target inflation reported on the eve of the meeting supports the case for an imminent cut, but the underlying structure of inflationary pressures may strengthen the Bank Board’s determination to turn more cautious going forward. Recent communications pointed to the intention to remain conservative and keep interest rates above their historical levels. Meanwhile, the new macroeconomic forecast will provide fresh insights on the interest-rate outlook.