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News

Low inflation despite high wages

2.05.2018
Company: Komerční banka, a.s.

Czech economic growth to continue on the back of domestic demand We keep our 2018 GDP growth forecast unchanged at 3.8%. Household consumption should remain strong on the back of rapid wage growth, while a lack of production capacity will likely propel investment.

Inflation unlikely to exceed 2% this year CZK appreciation has curbed inflation in the beginning of the year, and wage growth has yet to be fully passed through to prices, Komerční banka says.  

CNB to hike only once more this year Slumping inflation and deteriorating economic confidence in the euro area will likely make the CNB board cautious. We expect only one hike this year, in 4Q18.

Delay in rate hikes to slow koruna appreciation We only expect the koruna to breach EUR/CZK25 at the turn of 3Q-4Q18. At year-end, we see expect it to reach 24.70, and we see more strengthening in 1H19.

Slower increase in CZGB yields and strong demand to curb chances of eurobond issuance CZGB yields look set to rise, but slower than in our previous forecast. Combined with resilient demand on the domestic market, we think it is becoming less likely that the Finance Ministry will issue a eurobond this year.

Tags: Economics | Finance |

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