Final Word from Tuesday, February 6, 2024

Many analysts are expecting the Czech National Bank to cut its benchmark interest rate on Thur. by 50 basis points, to 6.25%, and the currency markets are reacting. The CNB's fix for the crown broke through Kč 25/euro yesterday for the first time since May 10, 2022, to Kč 25.005. The Financial Times wrote late last week that the Federal Reserve, the European Central Bank and the Bank of England are gearing up for interest-rate cuts but are in no rush to say when they will begin. The Czech currency has benefited from an interest-rate differential for most of the past seven years, but faster rate cuts at the CNB than at the Fed or ECB would mean lower profits from this and a weaker crown. Then-CNB Gov. Jiří Rusnok's policy of revaluing the Czech currency by raising interest rates, which we first identified in June 2018, could be coming to an end. What the exit from the revaluation might mean for businesses and individuals is more relevant now than a debate about adopting the euro. [ Czech Republic BoE devaluation ]