22:00Dec 05, 2021Reuters

Czech cenbank's monetary dept chief: market pricing in line with forecast -Hospodarske Noviny

The level of market pricing on further Czech interest rate hikes is in line with the central bank's forecast, the head of the Czech National Bank's (CNB) monetary department was quoted as saying.

The Czech central bank has been the most aggressive among central European peers in quickly lifting interest rates to battle surging inflationary pressures coming from both abroad and at home. But some board members have said the pace of tightening will moderate.

Asked on market expectations of a 25-50 basis point increase in December followed by another 25 basis point rise in February, the CNB's monetary department director Petr Kral said the market was not mistaken, in view of the bank's latest economic outlook.

"How it will end up is up to the bank board," Kral said in an interview with daily Hospodarske Noviny to be published on Monday.

"We are of course monitoring what market participants are thinking, and their expectations are in line with our outlook."

The CNB delivered its biggest rate hike in 24 years in November, lifting its key repo rate (CZCBIR=ECI) by 125 basis points to 2.75%.

With inflation continuing to surge - reaching 5.8% in October - before an expected peak early next year, further policy tightening is seen.

Markets scaled back rate hike expectations at the end of November after Governor Jiri Rusnok told Reuters the bank was in a comfortable position and that he saw rate hikes closer to the standard move of 25 basis points, while adding he could even imagine no hike happening in December.

Kral declined to comment when asked about Rusnok's comments.