Czech National Bank (CNB) delivered another hawkish surprise, but the koruna story remains unchanged. Economists at ING expect the EUR/CZK pair to stay in the 24.30-24.50 range.

CNB raised its key rate by 75bp to 5.75%

“CNB raised its key rate by 75bp to 5.75%, surprising the market by 25bps to the upside. At the same time, the central bank's new forecast expects rates to rise well above 8%. However, Governor Jiří Rusnok also presented an alternative scenario, with a shifted monetary policy horizon from 2023 to 2024 and implies a peak in rates below 6%, which is the current level and a later rate cut compared to the baseline scenario.”

“The koruna's story remains unchanged. The strong dollar, rising core rates and persistent risk aversion will continue to prevent a more significant appreciation and we continue to expect the koruna to remain in the 24.30-24.50 range.”