CNB Expected to Hold Rates as Czech Koruna Trades Sideways Against Euro

The Czech National Bank (CNB) is expected to maintain its policy rate at 3.75% today, according to Commerzbank's Tatha Ghose. The CNB framed June's hike as 'fine-tuning' rather than the start of a new tightening cycle, which aligns with their current stance.

Recent data shows that headline inflation picked up to 1.7% year-over-year in July, exactly in line with expectations and within target. However, fuel prices were the main driver behind this increase, rising by an estimated 3.6% month-over-month due to global factors.

The CNB can afford to wait before making any further moves, but it must avoid sounding dovish. Lending growth remains robust, nominal wage growth is likely strong, and house prices remain a concern for the board.

However, if the Iran situation escalates, pro-inflationary risks would rise significantly, and further rate hikes would become very likely. Against this backdrop, Commerzbank sees EUR/CZK trading sideways in the 24.20 range over the coming month.