WOOD Flash – Czech Republic macro: walking a thin line, CNB hikes by 75bps
At its meeting yesterday (5 May), the MPC at the CNB decided to raise the policy rate (2W repo) by 75bps, to 5.75%, higher than we and the consensus expected. The possibility for further rate increases was signalled for the coming meetings; however, the tone was on the cautious side, given the material downside risks for growth. Looking ahead, a further 75bps of tightening, to 6.50%, appears plausible, in our view, with a caveat that downside surprises will limit the room to 6.00% immediately. We also include our updated exchange rate model, which includes our latest macro estimates on policy rate and inflation, and suggests an eop fair value of the EUR/CZK of 23.5 in 2022E and 24.8 in 2023E.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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