Cnb review a hike is in the air

Key arguments

• The CNB held rates unanimously at 3.75% but framed November as a choice between stable rates and a hike, with pro-inflationary risks from housing, core inflation, credit, fiscal policy and wages.
• ING's baseline now includes one November hike, at 60% probability versus 40% for unchanged, conditional on regulated price adjustments and Middle East/Ukraine developments.
• Energy prices dominate the inflation outlook: Brent above $100/bbl near-term then easing above $80 by mid-2027 gives 3.3% average headline inflation in 2027; Brent above $90/bbl until late-2028 pushes headline near 4% and core to 3.1%.
• Positive real rates remain the CNB's preference; with one hike, real rates stay near zero until mid-2027, and a hawkish shift should flatten the curve and support the koruna, with EUR/CZK seen in a 24.300–24.350 range.

Corresponding source evidence

1. Our inflation forecast supports a rate hike in November, particularly under our scenario of elevated oil prices The CNB kept rates on hold at the September meeting but hinted that rate hikes could be coming Slightly hawkish tone with firm conviction The Czech National Bank left the policy rate unchanged at 3.75% in a unanimous decision.
2. That said, we are ready to unwind the call should signals on regulated price adjustments in January suggest a much milder outcome than we expect and/or the conflict in the Middle East or Ukraine de-escalate substantially, implying a tangible and lasting decline in oil and natural gas prices.
3. So, unless the expected increase in inflation at the turn of the year is decisively viewed as a temporary upsurge, driven solely by energy prices with few second-round effects, we think the case for a rate hike will prevail.