Inflationary pressures are easing
|The Czech economy remains subdued in 2H23, which is unlikely to change much in the coming months. Domestic demand is negatively affected by high inflation and falling real wages, with a recent cooling of foreign demand adding to this. A recovery is therefore likely to take place only in the course of next year, and, moreover, only gradually. Although real wages will start to rise again next year, unemployment is likely to increase. However, along with the weak economic performance, inflationary pressures are easing and inflation is expected to return towards the target in 2024.
The CNB could cut rates in December, as inflation is expected to be low next year. Uncertainty continues, however, as part of the board may prefer the first rate cut only next year. Whether the CNB starts this year or in 1Q24, it should be cutting rates gradually over the next year, as their current level is too tight, in our view. The koruna remains at weaker levels. While it could strengthen slightly next year, due to improving macro developments and better market sentiment, this is unlikely to be a significant move, as the CNB's falling rates will act in the opposite direction.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.