Czech central bank set to raise borrowing costs

Bloomberg

Europe’s most hawkish central bank is preparing to raise borrowing costs again, defying a global economic slowdown that’s made most of its peers more cautious.
Czech policy makers have held interest rates unchanged for the past three meetings as external risks including Brexit, trade wars, and weakening demand from neighboring Germany overshadowed domestic inflationary pressures. But with worst-case scenarios failing to materialise, most analysts expect the central bank to lift its benchmark a quarter point to 2 percent, adding to an unprecedented five hikes last year, the most in Europe.
Faster-than-expected inflation, a weak koruna and still-robust economic growth offer enough room for a rate increase, according to Raiffeisenbank AS analyst Eliska Jelinkova.
“The rhetoric of the board members, including the traditional doves, is tilting in favor of a hike,” she said.
The Czechs stand out as they go against a pullback from tighter monetary policy by central banks around the globe, including the US Federal Reserve and the European Central Bank. Wage growth helped pushed inflation to the highest since 2012, well above the 2 percent target. By contrast, Hungary’s central bank is expected to hold tight after announcing a cautious mix of tightening measures in March.
Board member Tomas Ho-lub said in an interview this month that he preferred a hike in the first half of the year.