Inflation trends in the CEE markets have been sliding further away from the central bank’s targets.  The European Central Bank has already undertaken measures, while other CEE central banks are changing their policy in response. But the Czech central bank seemed not so convinced it should follow some of its major global counterparts in introducing negative interest rates.

However, there appears to be a shift in wind. Within the CNB board, there is an active debate on negative interest rates which is evident from the remarks of individual members. Czech National Bank board member Jiri Rusnok was on the wires earlier on Friday saying that the central bank cannot rule out implementing negative rates. He added that negative rates could make sense only to reinforce current tools and could be used on new influx of capital, not on existing.

Rusnok said environment after latest ECB moves is not problematic and so far, no significant pressure from negative rates in euro zone is seen. The CNB is expected to cut rates into negative territory by summer. That said, the EUR-CZK is not expected to drift far from 27.00 in the near-term.