Despite this year’s deep economic slump, inflation is staying above 3%, i.e. above the central bank’s tolerance zone. The primary reason is the faster growth of prices (excluding the food and energy segments). However, inflation should begin declining towards the approaching end of this year, and this year’s full-year average inflation should finally be 3.2%. “Next year, inflation should continue slowing down to an average of 2.3% due to the weakened economy,” adds Michal Brožka.
Following the significant easing of its monetary policy in the first half of this year, the central bank will keep the rates at their current low levels at least until the end of next year. Komerční banka’s forecast predicts that the CNB will not relax its monetary policy any further. “The main argument against further relaxation is the prospects for the country’s inflation, which is staying above the upper limit of the CNB’s tolerance zone and the return of which to the 2% target will be gradual only,” explains Martin Gürtler, Komerční banka’s economist. He believes that unconventional monetary policy tools will not be introduced.
The koruna’s exchange rate has a stabilising effect because over the last few weeks it reflected the deteriorating epidemiological situation, weakening to over CZK 27/EUR. This helped the central bank to relax the exchange conditions. “As the current pandemic situation subsides we expect the koruna to quickly return to its stronger levels; for next year, we expect its average rate at CZK 26.30/EUR,” forecasts František Táborský.