Koruna Gains as CNB Hawkish Tone Supports Currency

Key Moments

Inflation Print Undershoots Expectations

Commerzbank analyst Tatha Ghose highlights that the latest Czech inflation data showed a notable downside surprise relative to both market projections and the Czech National Bank’s (CNB) own estimates. Headline consumer price inflation in June slowed to 1.5% year-on-year from 2.1% year-on-year, below the consensus expectation of 1.8% year-on-year and the CNB’s forecast of 2.1% year-on-year. On a month-on-month basis, the overall price level declined by 0.3% on a non-adjusted basis.

According to the analysis, the seasonally adjusted and smoothed month-on-month change is now close to zero, as domestic price levels continue to unwind earlier increases linked to the Iran war-related energy shock. Goods prices softened further – by 0.4 percentage points – with particularly weak dynamics in fuel and food components. In contrast, services inflation remained firm at 4.5% year-on-year, staying above target and signaling that core price pressures are still elevated.

CNB Officials Emphasize Core Inflation

The CNB has pushed back against the notion that the latest headline slowdown signals a durable shift in inflation dynamics. Policy maker Jakub Seidler pointed out on X that the drop in headline inflation was largely driven by more volatile sub-components, while underlying core inflation remains near the upper bound of the CNB’s 2% ± 1 percentage point comfort range.

He reiterated that the central bank’s focus is on securing long-term price stability and argued that core inflation has not yet fully converged toward the target range. In his assessment, the most recent inflation release should be treated as transitory rather than a confirmation of a sustained disinflation trend.

Policy Outlook and FX Implications

From this perspective, Commerzbank judges that the June inflation surprise does not significantly change the CNB’s monetary policy stance or communication strategy. While the bank’s analysis anticipates that core inflation will slow more convincingly in the coming quarters, this expectation is not seen as the basis for the CNB’s formal policy guidance at this stage.

As a result, markets may continue to consider the possibility of one additional 25 basis point rate increase in 2026. In this context, Commerzbank expects the Czech Koruna (CZK) to show relative strength against the Polish Zloty (PLN) in the months ahead.

“June’s Czech CPI flash release showed headline inflation easing to 1.5%y/y from 2.1%y/y, clearly softer than both market expectations (1.8%y/y) and the Czech National Bank’s (CNB’s) own forecast (2.1%y/y). The price level fell by 0.3%m/m on raw basis.”

“The seasonally‑adjusted and smoothed month‑on‑month rate of change is now near‑zero, as prices continue to reverse from the earlier Iran war energy spike. Goods prices were weaker than before – softer by 0.4pps – with fuel and food prices particularly soft. Service prices remained stubborn, still faster than target at 4.5%y/y, which implies that underlying core dynamics will take time to calm down.”

“CNB board member Jakub Seidler stressed in his X post that softer headline inflation was driven by volatile components, while core price growth remains in the upper end of CNB’s 2%±1pp comfort band. He underlined that CNB’s goal is long‑term price stability, and core inflation has not yet converged – in his view, this latest print is transitory.”

“On this reading, the June CPI surprise does not materially alter monetary policy stance or language. We hold that core inflation will decisively decelerate in coming quarters. But, this view will not be the basis for CNB’s official guidance, hence the market view could linger around possible one more 25bp rate hike later in 2026. On this market view, the koruna will likely outperform the zloty in coming months.”