From the Czech perspective, the main event of the week was the meeting of the Czech National Bank's Bank Board. It was
clear that the question of whether its interest rates should fall by 25 basis points or again by
50 points. The market had expected the Czech National Bank to opt for a 25-point rate cut. But among central bankers
In the end, the 50-point rate cut option prevailed. Five board members raised their hands in favour of this decision,
while 2 members voted for a more cautious 25-point rate cut. The base rate of the Czech National Bank is hereby
step falls to the level of 4.75 %
How to read this decision of the central bankers? The prevailing view in the boardroom was simply that inflation is not now
a very big scarecrow. Even the Bank Board was not convinced to slow the pace of interest rate cuts
stronger-than-expected wage growth or rapid price increases in services. Quite possibly a tongue in cheek
unexpectedly sharp drop in investment in the first quarter of this year. Czech National Bank Governor Aleš Michl said at a press conference on Thursday that further rate cuts would be more cautious. The reason for the caution at the next meetings, he said, is the upside risks to inflation. We therefore expect a slower pace of interest rate cuts in the coming months. They should only fall by 25 basis points at individual CNB meetings. Apparently, however, we will also see the Czech National Bank taking a complete pause from cutting rates at some meetings.
So the CNB base rate will probably be at 4 % at the end of this year. At that time
however, inflation will not be below the Czech National Bank's 2% target, but visibly above it. Moreover, the risk to
inflation at the start of 2025 will be related to the revaluation of price tags. This is also why the CNB's interest rate cuts
will eventually come to a temporary halt. This could halt the weakening of the koruna and help it reverse some of its recent losses.
Interesting events are also taking place in the USA. US statisticians in the ending week specified the result of the gross
The GDP of the United States in the first quarter of this year, on an annualised basis, according to
refined data increased by 1.4 %. This represents a slightly stronger growth than the previous estimate,
Even so, economic growth slowed sharply from 3.4 percent in last year's fourth quarter and was the weakest since
spring of 2022.
As usual, the International Monetary Fund (IMF) was wrong again. In April, in its outlook for the global economy
predicted that growth in the U.S. economy will accelerate to 2.7 percent this year from 2.5 percent last year
percentages. In other words, he was completely unjustifiably optimistic. But at that time, neither the IMF nor
economic analysts didn't know what they know today. Namely, how disastrously last night's presidential debate would turn out for
Joe Biden. This greatly skews the likely future outcome of the US election. And it also greatly
increases the risk of a downturn in stock markets - and consequently in US GDP.
However, a related issue is that if something is going to fall, something else is likely to rise (money flows
from somewhere somewhere). And according to commodity strategists at Bank of America, the price of gold could rise in the next 12 to 18
months to reach $3,000 per ounce if demand from large institutional investors increases (and this
I think it will increase). Although demand is not currently high enough to justify this price, the precious metal, especially gold, could also reach this level thanks to the Federal Reserve cutting interest rates, plus in response to a possible Trump victory.
Markéta Šichtačová
Next Finance s.r.o.
nextfinance.cz
gnews.cz-roz
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