Standard Chartered Lifts CNB Rate Outlook on Inflation

Key Moments

Revised CNB Policy Rate Path

Standard Chartered analyst Saabir Salad has shifted the outlook for Czech monetary policy, anticipating additional tightening by the Czech National Bank (CNB) beyond what was previously forecast. The new baseline calls for two more 25bps rate increases – one in November 2026 and another in the first quarter of 2027 – on top of a pre-emptive 25bps hike implemented in June.

Under this updated scenario, total tightening would amount to 75bps, pushing the CNB’s policy rate to 4.25% by the end of the first quarter of 2027. This represents a meaningful change from the earlier view, which had assumed no further hikes over the current year or the next.

Market Pricing and Rate Ceiling

The bank characterizes the projected 4.25% policy rate by end-Q1-2027 as a ceiling for the current cycle. However, the commentary acknowledges that financial markets are positioned for an even more aggressive trajectory. According to the analysis, investors are discounting more than 100bps of tightening over the coming 12 months, reflecting a more hawkish stance than Standard Chartered’s own forecast.

“We now expect the Czech National Bank (CNB) to deliver a 25bps hike in November 2026 and another in Q1-2027; we previously saw no further hikes this year or next. Along with the 25bps pre-emptive hike in June, this would take cumulative tightening to 75bps, reaching a policy rate ceiling of 4.25% by end-Q1-2027.”

“Markets are more hawkish than we are, pricing more than 100bps of tightening over the next 12 months. We think the CNB may be comfortable allowing some of this hawkish market pricing to persist.”

“If this effect is strong enough, the CNB may not need to deliver all of the tightening priced in by markets. We therefore see balanced risks to our call.”

Inflation Outlook and Key Drivers

Standard Chartered has also revised its inflation expectations for the Czech economy. The bank now projects 2027 CPI inflation at 2.6%, up from a previous estimate of 2.0%. The revision reflects concerns that ongoing geopolitical tensions in the Middle East could continue to influence the inflation backdrop, notably through the energy channel.

“Domestically, core inflation – the key metric for policy makers – has remained elevated this year at around 3%, the upper bound of the central bank’s target range. Externally, the outlook will depend on the Middle East conflict, particularly its implications for energy prices.”

Global Policy Context and CNB Reaction Function

The note underscores that developments in global monetary policy will be crucial for the CNB’s next steps. In particular, the future paths of the Federal Reserve and the European Central Bank are seen as potential catalysts for further adjustment in Czech rates beyond the newly assumed November move.

“The rate paths of major central banks are also important: a more hawkish Fed and ECB would increase the likelihood of further CNB tightening beyond November, while a dovish repricing could allow the CNB to remain on hold after a November hike.”

Forecast Summary