Crown steadies after CPI data bolsters case for more rate hikes

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BUDAPEST — The Czech crown held

onto Friday’s gains in early Monday trade, underpinned by an

increase in inflation to a 13-year-high, which some economists

say could bolster the case for more aggressive monetary

tightening.

The crown and the Hungarian forint have

outperformed central European peers with gains of some 3.5%

versus the euro this year as central banks in Prague and

Budapest launched a cycle of rate hikes to rein in price growth.

Czech inflation reached 4.1% year-on-year in

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August, overshooting the central bank’s 1 percentage point

tolerance band around its 2% target by a wide margin, data

showed on Friday.

The Czech central bank has lifted its key two-week repo rate

to 0.75% in two standard 25-basis-point steps since June to

fight inflation.

“We have recently revised our rate forecast and now expect a

rate hike of 25 basis points at each of the remaining three

meetings this year,” economists at Commerzbank said in a note.

“However, in view of the August price data, we see the risk

to this forecast on the upside, at least for September, and

therefore also consider an increase of 50 basis points

possible,” it added.

Hungary’s central bank, which raised its base rate by a

combined 90 basis points since June to 1.5%, heads

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into a pivotal meeting next week that could determine the pace

of further tightening.

Hungarian inflation data published last week exceeded

expectations and also overshot the central bank’s 2%-4% target

range amid a faster-than-expected recovery from the coronavirus

pandemic.

The zloty was marginally stronger in early trade,

having underperformed the crown and the forint as the Polish

central bank has so far held off on monetary tightening over

fears of choking off the economic recovery.

Some economists say, however, that the bank’s stance could

put more pressure on the zloty if adverse economic data emerge

in week ahead.

“Negative surprises in the data may perpetuate expectations

for a delay in the moment of interest rate hikes in Poland,

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increasing the pressure on the zloty,” Bank Millennium said in a

report.

CEE SNAPSHO AT

MARKETS T 0924

CET

CURRENC

IES

Latest Previou Daily Change

s

bid close change in 2021

EURCZK Czech

EURHUF Hungary 0 0

EURPLN Polish

EURRON Romanian

EURHRK Croatian

EURRSD Serbian 0 0

Note: calcula 1800

daily ted CET

change from

STOCKS

Latest Previou Daily Change

s

close change in 2021

.PX Prague 1286.86 1284.48 +0.19% +25.29

00 %

.BUX Budapest 52836.1 52755.6 +0.15% +25.48

3 8 %

.WIG20 Warsaw <.wig20> %

.BETI Buchares 12425.2 12402.4 +0.18% +26.72

t 9 3 %

.SBITO Ljubljan <.sbito p a> %

.CRBEX Zagreb <.crbex> %

.BELEX Belgrade <.belex>

.SOFIX Sofia <.sofix> %

BONDS

Yield Yield Spread Daily

(bid) change vs Bund change

in

Czech spread

Republic

CZ2YT= 2-year s

CZ5YT= 5-year s

CZ10YT s

Poland

PL2YT= 2-year s

PL5YT= 5-year s

PL10YT s

FRA

3×6 6×9 9×12 3M

interba

nk

Czech

Hungary

Poland

Note: FRA quotes are for

ask prices

********************************************

******************

(Reporting by Gergely Szakacs;

Editing by Andrew Cawthorne)

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