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EMEA Weekly: CNB's Hawkish Comments, CBR To Remain On Hold?‏

ByDanske Markets
Published 02/08/2013, 05:31 AM
Updated 05/14/2017, 06:45 AM
BMAm
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CNB's hawkish comments surprised us and not only us

In a surprising move this week, the Czech central bank managed to reverse the direction of its monetary policy. At the monetary policy setting meeting this week, the CNB kept the key policy rate at 0.05% as expected but in the statement following the rate decision it surprised the markets and us with its hawkish tone. The CNB Governor said in his statement that given the recent CZK weakening, further monetary easing is less urgent.

Russian central bank is likely to stay on hold
We expect a central bank rate decision from Russia next week and we expect the CBR to remain on hold for now. Despite the higher-than-expected inflation in January, we believe the CBR currently has an easing bias, as economic growth is slowing. Most of the current acceleration in inflation is due to seasonal tariff increases and inflation is likely to ease in the coming months. However, there are conflicting views on the monetary policy direction in Russia, as politicians widely speak for looser monetary policy to enhance growth, whereas central bankers are taking a more hawkish stance to curb inflation. All in all, the Russian central bank has clearly improved its communication lately and as consensus is not expecting a change in rates, most interest is likely to be on the CBR comments. We expect a 25bp rate cut in March or April due to sluggish economic performance.

Baltic macro update
Next week, Latvia and Estonia are due to release their Q4 12 GDP flash estimates and January 2013 CPI inflation, with Lithuania due to release GDP and CPI inflation for January 2013.

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