Today’s decision by the Czech National Bank (ČNB) to leave interest rates unchanged was apparently due to higher inflation, which will be announced for October, and a weaker exchange rate of the koruna. Analysts contacted by ČTK agreed on this. The CNB Banking Council left the base interest rate at seven percent. The base interest rate has been at this level since June 2022.
The koruna reacted to this decision by strengthening by roughly ten halers, thus strengthening its exchange rate against the euro to 24.55 CZK/EUR, stated Cyrrus analyst Vít Hradil. According to him, it is already possible to speculate that the bank board, despite significantly subdued economic activity, has decided to risk a potentially excessive strangulation of the economy rather than an insufficient strangulation of inflation.
“The reasons for this decision will be explained only at the press conference at 15:45. However, it can be assumed that the Bank Board considered mainly the communication aspects of a possible rate cut, which might not be understood by the general public in a situation of continued high inflation, which will also increase in October for technical reasons.” Czech Banking Association analyst Jakub Seidler told ČTK.
At the same time, according to him, the mild relaxation of monetary conditions was also delivered by the weaker koruna, which could also have been a supporting argument for today’s decision to leave rates unchanged. However, today’s decision on rate stability does not change the fact that rates will start to fall very soon, and may thus be lowered for the first time at the next monetary meeting on December 21, he added.
This time, it cannot be stated that it was a decision that was fully in line with the expectations of the financial market, noted Generali Investments analyst Radomír Jáč. According to him, the expectations of market analysts were almost evenly divided between the scenario of rate stability and their slight reduction, but the expectation that the CNB would cut interest rates by a quarter of a percentage point prevailed slightly, he noted. Experts are not unanimous on this. “We expect a reduction, albeit a very gradual one, only at the beginning of next year,” said FinGO’s mortgage specialist Jana Vaisová.
The results of the German elections will not significantly affect the development of the Czech economy. Analysts contacted today by ČTK agreed on this. According to them, the success of the Greens may mean contradictions regarding the use of nuclear power plants and may also increase pressure on car companies to abandon internal combustion engines. However, Germany will remain a stable and reliable partner, which is essential for Czech foreign trade, they added.
Analysts: The results of the elections will not affect the development of the exchange rate of the koruna and prices of Czech sharesThe results of the parliamentary elections, in which the coalition of opposition parties succeeded, will not affect the development of the exchange rate of the koruna, prices of Czech shares or government bonds. Analysts contacted by ČTK agreed on this. The majority in the lower house of the Parliament will be won by the electoral coalition Spolu, consisting of ODS, TOP 09 and KDU-ČSL, and Pirátů se Starosty.
Analysts: Higher inflation will speed up the termination of the CNB’s exchange rate commitmentJanuary inflation exceeded the expectations of analysts and the estimates of the Czech National Bank, so it may mean a faster termination of the exchange rate commitment of the central bank during the second quarter of this year. Analysts interviewed by ČTK agreed on this. Year-on-year inflation accelerated to 2.2 percent in January from two percent in December. The CNB conditioned the end of the exchange rate commitment regime on inflation being stable near the two percent target.
Analysts: Higher rates will quickly make mortgages more expensive, interest on deposits will rise laterThe increase in the basic interest rate of the central bank will be reflected very quickly in the price of mortgages and, with a delay, in higher interest rates on bank deposits. Analysts interviewed by ČTK agreed on this. Today, the Banking Council of the Czech National Bank increased the base interest rate by 0.5 percentage point to five percent. It was last that high in 2001.
Analysts: The development of Czech shares will depend on the parameters of the so-called windfall taxThe development of the main Czech stocks, i.e. ČEZ and banks, in the rest of this year will depend mainly on the parameters of the windfall tax, agreed analysts contacted by ČTK today. According to them, uncertainty regarding its final form may cause foreign investors to leave the stock exchange. This year, the PX index of the Prague Stock Exchange lost over 18 percent.
Analysts: The development of confidence in the economy indicates a worsening of the developmentThe March data on confidence in the Czech economy, as the first official macroeconomic indicator after the start of the war in Ukraine, indicate that the development of the economy will be worse this year than was generally expected at the beginning of this year. This follows from the comments of economists regarding today’s statistics.
Analysts: The development of inflation surprised, it will remain around two percentAccording to analysts, the development of inflation in January was a surprise, mainly due to the development of food prices. Economists expected a drop in year-on-year inflation below two percent in January. According to them, inflation can be expected to continue to be around two percent in the coming months, because, among other things, the rise in fuel prices will resume due to rising oil prices. This follows from the statements of analysts contacted by ČTK. According to them, the data confirmed that the beginning of the year is always associated with higher uncertainty regarding the development of prices. In addition, this year the pandemic has intensified, they pointed out.
Analysts: The basic interest rate of the CNB is already approaching its peakThe basic interest rate of the Czech National Bank is approaching its peak, further increases should not be so significant. Analysts interviewed by ČTK agreed on this. According to them, it should not exceed five percent, it could start to decline in the second half of the year. But it will depend on the development of inflation, they added. Today, the CNB Banking Council increased the base interest rate by 0.75 percentage points to 4.5 percent. This is the highest since the beginning of 2002.
Analysts: The focus on value stocks is behind the rise in the PX indexThe reason for the increase in the price of Czech shares to ten-year highs is mainly the current change in the focus of investors from growth to value companies, which clearly dominate the PX index of the Prague Stock Exchange. This was stated by analysts contacted by ČTK today. Another reason is the improving pandemic situation. The index strengthened to 1,143.3 points on Wednesday, its highest closing value since August 3, 2011.
Analysts: Behind the drop in CEZ’s share price are the government’s considerations about additional taxationBehind the current decline in the share price of the energy company ČEZ is the government’s reasoning that the company’s increased profits could be additionally taxed. Analysts contacted by ČTK today agreed on this. Most experts consider this possible move by the government to be a mistake. From the beginning of the year to the peak, which was on June 9, CEZ shares on the Prague Stock Exchange added 47 percent, but since then they have written off 18 percent, according to stock exchange data.
Analysts: Behind the drop in CEZ shares is a government proposal that will facilitate the nationalization of the companyAccording to analysts, behind today’s drop of ČEZ group shares by eight percent to CZK 1,041 is the government’s proposal to approve new legislation that would facilitate the nationalization of the company or part of it. Now the approval of 90 percent of the shareholders is needed, 75 percent would be enough. At the same time, the state owns roughly 70 percent of the company. The proposal now heads to the House of Representatives.
Analysts: Fears of trade wars are behind the fall in stocksBehind the current slump in world stock markets, the drop in the price of oil and the rise in the price of gold is mainly a combination of concerns about the effects of the trade war between the US and China, the rise in interest rates in the United States, the situation in Italy and nervousness about Brexit. Analysts interviewed by ČTK agreed on this today.
Analysts: Behind the fall in the price of gold is the strengthening of the dollarThe fall in the price of gold in recent weeks is mainly due to the strengthening of the US dollar due to the increase in interest rates in the US. Analysts contacted by ČTK agreed on this. Since the beginning of the year, gold has become cheaper by three percent to today’s USD 1,907, i.e. about CZK 42,100 per ounce, which corresponds to 31.1 grams.
Analysts: Behind the recession is a decline in consumption, the recovery will come in the second quarterThe Czech economy went into recession in the last quarter of last year mainly due to low household consumption. Analysts agree on this when evaluating the revised estimate of the development of the gross domestic product (GDP), which was published today by the Czech Statistical Office (CZSO). A moderate economic recovery is expected from the second quarter of this year, GDP growth will be close to zero for the whole year. GDP in the fourth quarter fell by 0.4 percent compared to the previous quarter, the CZSO reported today.
Analysts: CEZ’s profit fell by up to 60% in the quarter, due to the extraordinary taxThe profit of the ČEZ energy group fell significantly in the first quarter of this year, analysts expect. According to estimates, the company’s net profit for the first three months of the year should be around ten billion crowns, which would mean a drop of about 60 percent compared to last year. The main cause is the impact of levies on sales and tax on unexpected profits (windfall tax). ČEZ’s sales, on the other hand, should increase compared to last year due to higher electricity prices. Analysts expect the company’s full-year net profit to be between 30 and 40 billion crowns. The group will announce its first quarter results on Thursday.
Analysts: Gold and silver have become cheaper this year, while platinum, copper and oil have become more expensiveIn the first quarter of this year, gold weakened by 9.5 percent to $1,728 per troy ounce. Silver also dropped seven percent to $25 an ounce. Conversely, the price of platinum rose by 12 percent to $1,208, palladium by eight percent to $2,656 and copper by 13 percent to $4, the highest price in ten years. Oil rose in price by more than a fifth, analysts said today when asked by ČTK.
Analysts: Gold and silver went up by five percent, oil and gas by tens of pct.The price of precious metals and commodities such as oil, natural gas or wheat and corn is rising significantly this year. In February, according to analysts contacted by ČTK, the escalation of the conflict in Ukraine, where Russian troops invaded, contributed significantly to this. Gold and silver rose in price by about five percent, oil and natural gas by tens of percent.
Analysts: Gold has risen in price by 20 percent this yearSimilar to last year, the price of gold increased by roughly 20 percent this year, and according to most analysts, the upward trend should continue. The yellow metal is being helped by low interest rates as well as an unprecedented influx of money released by central banks to support the economy hit by the coronavirus crisis. According to the DPA agency, some of the analysts believe that new records could also be set next year. Now the price is around $1,880 per troy ounce (oz; 31.1 grams).
Analysts: Gold, silver and copper fell slightly in January, while oil rose significantly in priceThe prices of gold, silver and copper fell slightly in January, while the prices of energy commodities, namely natural gas by 40 percent and oil by 17 percent, rose significantly. The price of palladium, which is an important component in the automotive industry, also rose by a quarter. Analysts contacted told ČTK today.
Analysts: Gold rose in price by 18 percent in three months, and in crowns by three percentThe price of gold in US dollars has risen from $1,630 to $1,932 today, an increase of more than 18 percent since November last year. For Czech investors buying gold in crowns, this was an increase of three percent due to the strengthening exchange rate of the crown against the dollar. Golden Gate CZ company manager Pavel Řihák told ČTK.
