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2021/03/10 / Erste Group Research

The CNB could hike twice this year

The Czech economy will start recovering from 2Q21, as a further improvement in foreign demand will be accompanied by a boost in household consumption and private investments during a gradual termination of several restrictive measures in the economy (lockdown). Favorable economic development will continue in the next two years, when the economy will also be supported by EU funds. Although the unemployment rate has been slightly increasing, its level remains low, which will be one of the key factors behind the revival of household consumption during the next few quarters.

Although inflation has slowed towards the inflation target recently, it will start strengthening again from 2Q21, as a consequence of the economic recovery and tax changes positively affecting household demand. To prevent inflation from rising above the tolerance band, the CNB will start policy tightening in 2H21. The current economic data indicates that the CNB could hike twice this year and keep rates rising during the next two years. However, uncertainty remains, with the pandemic as a key factor affecting the timing of rate increases.


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General information

AuthorErste Group Research
Date2021/03/10
Languageen
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusCzech Republic
Currency in focusCzech Koruna
Sector in focus-
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