Crown corporations expect another big rate hike

BUDAPEST, Feb 3 (Reuters) – The Czech koruna firmed on Thursday on expectations that the central bank would make another big interest rate hike later in the day to push the crucial two-week repo rate at its highest level in two decades.

Central European central banks have tightened monetary policy since last year to rein in runaway inflation, a move that has supported the region’s currencies.

The krone gained 0.17% and traded at 24.173 to the euro ahead of the central bank meeting, where nine of 12 analysts in a Reuters poll expect a 75 basis point hike, putting the rate two-week key repo at 4.50%.

The market, per Forward Rate Agreements (FRA), appeared to be pricing an even heavier move, by a full percentage point.

Commerzbank expects a 75bp hike but “wouldn’t entirely rule out a 100bp hike” as core inflation surprisingly picked up in December.

Some Czech central bankers signaled Thursday’s rise could be the latest in a series of stronger moves that began in September.

The board has raised the main rate by a total of 300 basis points in the past three meetings, including a 125 basis point hike in November, its biggest in 24 years.

The Hungarian forint strengthened 0.16% to 354.40, trading at a two-week high after the central bank left its one-week deposit rate unchanged at 4.3% after the having risen by 30 basis points in last week’s tender.

The central bank uses the one-week deposit facility to deal with short-term market volatility.

The Polish zloty remained stable, maintaining its recent gains which were triggered by hawkish comments from the central bank governor.

Geopolitical tensions could weigh on the currency, however, writes Bank Millennium in a note.

“The US decision to send additional troops to Poland and Romania increases tension and promotes the depreciation of the zloty,” they wrote.

The United States will send nearly 3,000 additional troops to Poland and Romania to protect Eastern Europe from a possible spillover from the crisis stemming from the buildup of Russian troops near Ukraine, officials said Wednesday. Americans. Russia has denied plans to invade Ukraine. Read more

Most stocks in the region were up, with Budapest (.BUX) adding 0.4%, while Prague (.PX) gained 0.34%. Bucharest (.BETI) was up 0.37%, but Warsaw (.WIG20) reversed the trend and slipped 0.46%.

Additional reporting by Robert Muller in Prague and Pawel Florkiewicz in Warsaw; Editing by Aditya Soni

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